Climate Change (E1)

In 2024, we designed our first transition plan for climate protection, which we will further develop in 2025. It outlines how we intend to contribute to mitigating climate change and achieving our own climate goals. This underscores our commitment to the Paris Agreement on climate protection. The transition plan, in line with our climate strategy, focuses on our major decarbonization levers, such as reducing process emissions, improving energy efficiency, and significantly increasing the use of renewable energies. Furthermore, we updated our analysis regarding our climate risks and opportunities to gain a comprehensive understanding of the upcoming challenges. By continuously integrating our transition plan into our corporate strategy, we aim to actively support the global effort to limit global warming to 1.5°C.

Our material impacts, risks and opportunities related to climate change (E1 SBM-3)

As part of the materiality analysis, we identified impacts, risks, and opportunities related to climate change. Our disclosures focus on the following significant impacts:

Climate resilience analysis

Climate resilience analysis is a vital tool for identifying and evaluating the risks and opportunities that climate change presents to our business. In 2022, we conducted a qualitative assessment of climate risks and vulnerabilities across our upstream, own operations, and downstream activities. Building on this foundation, we aligned our efforts with TCFD recommendations in 2023 and 2024 by undertaking quantitative climate scenario analyses, specifically focusing on upstream activities and our own operations, excluding downstream activities. This assessment identified climate-related risks and opportunities across two potential climate pathways: a 1.5°C Paris Agreement-aligned scenario and an IPCC-based 4.0°C scenario, until 2050. Our analysis, guided by the TCFD framework, encompasses both transition and physical risks and opportunities related to our business activities.

Climate risks and opportunities refer to potential financial impacts stemming from climate change, categorized as follows:

• Physical Risks: These risks arise from damage and losses due to climate change, which can be acute (event-driven) or chronic (gradual shifts). Examples include, for example, extreme weather events, like droughts, heatwaves, floods, and forest fires. Our assessments highlight the necessity of resilient infrastructure and adequate insurance coverage to mitigate these risks.
• Transition Risks: These risks stem from the transition to a lower-carbon economy, which may impose various constraints on companies. These constraints fall under categories such as policy and legal, technology, market, and reputation. Our strategy aims to manage these risks through investments in renewable energy, enhancements in energy efficiency, and supplier decarbonization programs. We also incorporate greenhouse gas emissions criteria into our investment decisions and apply a shadow price for carbon to guide our strategic choices.
• Opportunities: The shift towards a low-carbon economy also generates opportunities (generally related to “transition”) such as potentially increased revenue from rising market demand for certain products. We plan to capitalize on these opportunities by aligning our market strategies with sustainability trends, thereby strengthening our competitive position and fostering growth.

The narratives used in our scenario analysis encompass a range of plausible futures, including scenarios that reflect varying degrees of climate mitigation efforts as well as economic and technological developments. We focus on time horizons of 2030 and 2050 to align with key milestones in global climate policy and our internal sustainability targets. The endpoints of these scenarios provide a framework for assessing potential risks and opportunities under different climate conditions, including both optimistic and pessimistic outcomes. The range of scenarios used covers its plausible risks and uncertainties due to the comprehensive nature of the scenarios selected. By incorporating a variety of narratives that reflect different levels of climate action and technological advancement, we can better understand the potential impacts on our business. This approach allows us to capture a wide spectrum of possible regulatory changes, market dynamics, and changes in consumer behaviors, ensuring that we are prepared for a range of outcomes. It is important to note that actual greenhouse gas emissions and global warming may diverge from the scenarios employed, influenced by global climate protection initiatives, demographic trends, social factors, and technological advancements.

Our process to identify and assess climate-related impacts, risks, and opportunities

Our approach to identifying and evaluating climate-related impacts, risks, and opportunities consists of several key steps:

• Identification of Critical Sites: We began by shortlisting our most significant sites for our global operations, also considering their total insured value.
• GHG Inventory Analysis: We used our existing internal analysis to evaluate emissions across our operations, helping us understand the sources and magnitudes of our emissions.
• Physical Risks Identification: We then conducted a comprehensive assessment of climate-related physical risks by identifying potential hazards such as floods, heatwaves, and windstorms, particularly under the high-emission climate scenario (4.0°C). This involved evaluating the exposure and sensitivity of our assets and activities to these hazards.
• Transition Risks and Opportunities: We assessed climate-related transition risks and opportunities within our operations and value chain by identifying key transition drivers related to a 1.5°C climate scenario. We then evaluated how our activities and financials might be exposed to these variables, with related quantifications of gross transition risks or opportunities.
• Risk Assessment: We analyzed historical data, scientific research, and expert opinions to determine the probability and characteristics of potential catastrophic events in specific areas. For relevant risks, we evaluated their potential impacts both with and without mitigation actions, considering, for instance, strategic investments in renewable energy and enhancing energy efficiency.
• Exposure Analysis: We identified and quantified the assets that could be at risk due to climate events, for example, buildings, infrastructure, inventory, and other physical or financial assets.
• Vulnerability Analysis: We assessed the vulnerability of exposed assets, to understand how different asset types respond to hazards and to estimate their susceptibility to damage or loss.
• Event Simulation: We simulated the potential impact of events by combining hazard characteristics, such as intensity and duration, with asset vulnerability to estimate possible losses.
• Loss Estimation: We calculated expected losses in terms of financial impact, including property damage, business interruption, liability claims, and other relevant factors.

Assessment of Climate-Related Hazards

Our company utilizes Climate Risk Assessment (CRA) methodology and models of an external provider to quantify both physical and transition risks and opportunities across various time horizons. For physical risks, these are linked to the expected lifetime of assets, strategic planning, and capital allocation. The identification of climate-related hazards and assessment of exposure and sensitivity are informed by high-emission climate scenarios and relevant regional climate projections. This process involves detailed analysis using climate models to evaluate the potential frequency and severity of hazards. We systematically assess the exposure and sensitivity of our assets and business activities by considering geographic, operational, and temporal factors:

• Likelihood: Evaluating the probability of occurrence for each identified hazard based on historical data and climate models.
• Magnitude: Assessing the potential severity of each hazard and its scale of impact on our operations and assets.
• Duration: Considering the expected duration of each hazard to understand potential long-term impacts on our business.
• Geospatial Coordinates: Incorporating geospatial data to analyze specific locations of our operations and supply chains, identifying vulnerabilities based on geographic exposure to climate-related hazards.

This structured approach enables us to systematically assess the extent to which our assets and business activities may be exposed to these hazards. Our analysis of physical climate-related risks is based on geospatial coordinates specific to our locations, allowing an assessment of vulnerabilities.

Transition Risks and Opportunities Identification

We implemented a comprehensive process to identify and quantify transition risks and opportunities within our operations and across our value chains. We evaluate the likelihood of potential transition events occurring, analyze the magnitude of their impact on our assets and business activities, and consider the duration over which these impacts may unfold. This involves several key steps:

• Identification of Climate Transition Drivers: We identified potential transition drivers, such as increased taxes on Scope 1 greenhouse gas emissions, the substitution of existing products with lower emission options, changing customer behavior, and shifts in consumer preferences. This identification spans short-, medium-, and long-term horizons.
• Informing the Identification and Assessment: Our identification of transition drivers and the assessment of exposure are informed by climate-related scenario analysis. We utilized a scenario consistent with the Paris Agreement, particularly aiming to limit climate change to 1.5°C versus pre-industrial levels.
• Key Forces and Drivers: In our scenario analysis, we consider several critical forces and drivers impacting our operations and strategic planning, including (but not limited to) policy assumptions, which involve analyzing potential impacts of regulatory frameworks and climate policies that may emerge in response to climate change; macroeconomic trends, which consider economic factors such as GDP growth, changes in consumer spending patterns that influence market demand, or changes in energy consumption patterns towards renewables; energy usage and mix, which evaluate shifts in energy consumption patterns and the transition to renewable energy sources; and technology assumptions, which consider advancements in technology that may impact our industry, including innovations in energy efficiency and carbon capture solutions.

By employing this range of scenarios, we ensure a comprehensive understanding of the potential risks and opportunities that climate change may present. These transition risks and opportunities are relevant to our company because they directly influence our strategic positioning in a low-carbon economy, impact our compliance with regulatory frameworks, and affect our reputation among stakeholders who prioritize sustainability. By proactively managing these risks, we can enhance our competitive advantage and drive innovation.

Results

The resilience analysis indicates that we are well-positioned to adjust and adapt our strategy and business model to climate change, with important aspects including managing assets, shifting products and services, and demonstrating resilience through securing ongoing access to finance in the future. For the time horizon until 2050, we found that the impact of physical risk on our sites is limited under a 4°C scenario. The analysis of transition risks has provided valuable insights that will inform our ongoing strategic planning and adaptation efforts. Moving forward, we will work on linking the resilience analysis with our transition plan to even more strongly integrate climate-related issues into our decision-making and strategy.

Our Strategic Approach

Our strategic approach aims to integrate climate considerations into our business practices. Additionally, we embed sustainability into our product development and market strategies. By prioritizing innovation and sustainable practices, we aim to enhance our resilience against climate-related risks while capturing opportunities from the transition to a low-carbon economy. Our commitment to sustainability aligns with global climate initiatives and drives long-term growth and competitiveness.

While our resilience analysis forms a foundational framework for managing climate-related risks, we recognize the uncertainties in predicting future climate conditions and regulatory landscapes. We are actively working to enhance our ability to adapt to these uncertainties, by focusing on supply chain sustainability and energy efficiency and reducing our carbon footprint as part of our inaugural transition plan. Additionally, while we have defined the time horizons, we are not yet aligned with the expected lifetime of our assets, strategic planning horizons, and capital allocation plans. We will be exploring ways to better integrate these aspects into our long-term planning and decision-making processes. Furthermore, we plan to enhance accuracy by conducting our analysis at the individual site level, rather than grouping sites close together.

Finally, we are also developing a comprehensive risk management strategy to strengthen our capacity to adapt to climate-related challenges and opportunities. More details on the actions and resources allocated to climate initiatives can be found in section E1-3.

Climate-related considerations in compensation

 Climate-related considerations are integral to the remuneration of our members of the administrative and management bodies. Particularly, the performance of the Executive Board is assessed against greenhouse gas (GHG) emission reduction targets as reported under Disclosure Requirement E1-4.

In the current reporting period, a percentage of the remuneration recognized is directly linked to climate-related considerations. This includes the ongoing integration of sustainability targets into the Long-Term Incentive Plan (LTIP) for Executives, including the Executive Board. The first LTIP target including GHG emissions was set in fiscal year 2022, focusing on Scope 1 and 2 emissions, with an evaluation timeframe covering 2022, 2023, and 2024. In 2023, we established a new LTIP target for the period of 2023 to 2025, and in 2024, we set another target for 2024 to 2026. Each target aims for absolute emission reductions, with the target values increasing annually. We are currently discussing the proposal for the 2025-2027 targets. Potential payout for the first evaluation timeframe for the Executive Board will occur in 2026 and going forward respectively. The climate-related considerations factored into the remuneration include specific targets for scope 1 and 2 GHG emissions reductions, which are aligned with our commitment to reach the Science Based Targets initiative (SBTi) approved 1.5°C near-term goals for 2030. The Executive Board is responsible for overseeing the implementation of climate protection targets. The Group’s Sustainability Board regularly reviews the progress of performance on the targets. This board, led by the Chief Sustainability Officer, ensures alignment between the corporate sustainability strategy and the individual business strategies, thus reinforcing the commitment to climate-related performance.

The integration of climate-related targets into the remuneration framework reflects our commitment to sustainability and the importance of leadership accountability in achieving our climate objectives. For 2024 the climate-related remuneration of the Executive Board cannot be determined as the LTIP 2022 will only be paid out in 2026.

Our transition plan for climate change mitigation (E1-1)

This year marks the development of our inaugural transition plan, reinforcing our commitment to climate change mitigation in line with the Paris Climate Agreement. We aim to reduce our direct (Scope 1) and indirect (Scope 2) greenhouse gas emissions by 50% each by 2030, using 2020 as the base year. In addition, we have pledged to lower our indirect emissions along the entire value chain (Scope 3) by 52% per euro value added, also using 2020 as the baseline. By 2030, we aim to cover 80% of our purchased electricity with renewable sources. Our strategy encompasses a comprehensive approach that includes reducing process emissions, enhancing energy efficiency across our operations, and significantly increasing our use of renewable energy. These targets aim to align our operations with the global efforts to limit warming to 1.5°C, as outlined in the Paris Agreement.

Our transition plan is currently undergoing evaluation and inclusion in our business sector strategies. This process is ongoing, and all sector business strategies are and will be approved by the Executive Board to ensure that they are aligned with our sustainability objectives and to keep us on track to achieve our targets.

To achieve our greenhouse gas (GHG) reduction targets (details on these targets can be found in section E1-4), we are implementing essential decarbonization levers such as energy management, process emissions reduction, material efficiency, mode shift, renewable energy purchase and supplier decarbonization (more information can be found in our action plan under E1-3).

Furthermore, we are working on processes to mitigate against the risks of potentially 'locked-in' greenhouse gas emissions. This involves a thorough qualitative assessment of our relevant facilities to identify potential locked-in emissions that could jeopardize our greenhouse gas reduction targets. The two identified facilities, a gas turbine at our site in Darmstadt and a gas engine at our site in Gernsheim, may significantly impact our GHG emission reduction targets by contributing to overall emissions levels and driving transition risks associated with regulatory changes and market developments. As an initial approach, we aligned ourselves with the EU Emissions Trading System (EU-ETS) during the reporting year and identified these greenhouse gas-intensive facilities that fall under the EU-ETS scheme. To manage these facilities effectively, we will review the implementation of specific strategies. At the same time, we are already working on energy efficiency programs.

We are currently integrating our transition plan into our business strategy and financial planning to ensure alignment with our sustainability goals. Our company does not currently create an investment plan in the sense of the EU Taxonomy for transforming taxonomy-eligible into taxonomy-aligned economic activities. For this reason, aligning the transition plan with such a plan is not possible. We intend to conduct regular reviews to monitor our progress and adjust strategies to ensure we achieve our sustainability goals. We included capital expenditures (CapEx) and operational expenditures (OpEx) in our strategic planning and allocated resources strategically within the business areas to advance our initiatives for 2024/2025, with the intention of ensuring immediate progress in achieving our sustainability goals. Additionally, we are working to provide the necessary investments to drive the long-term transformation and resilience of our entire business activity within the framework of our transition plan. The Climate Benchmark Standards Regulation is not applicable to us, as we are not institutional investors. 

The first elements of our transition plan are already being implemented. The individual measures are regularly evaluated to ensure long-term support for our sustainability goals. This includes regular assessments of our progress based on established metrics. Furthermore, we gain insights through collaboration with stakeholders, which are incorporated into our strategies. We are committed to transparency in our reporting and inform about our successes and challenges in achieving our sustainability goals.

Our short-term goal for 2030 includes a targeted reduction of Scope 1 and Scope 2 emissions by 50% each through initiatives such as NF₃ reduction, N₂O recycling, and the comprehensive use of renewable energies. By 2040, we aim for climate neutrality by maximizing renewable energy generation at our sites and minimizing process emissions. Our commitment also extends to Scope 3, where we expect significant reductions through dematerialization, circular economy, and continuously improved supply chain partnerships. Details of our action plans can be found in section E1-3.

In developing this first iteration of our transition plan, we engaged with a wide range of stakeholders to ensure a comprehensive and inclusive approach. This involved collaboration with all business sectors and key functions such as procurement, enabling us to integrate diverse perspectives and expertise. We conducted detailed energy assessments for representative sites and explored multiple GHG pathway scenarios to identify the most effective strategies for achieving our sustainability goals. 

Our policies in connection with climate change mitigation and climate change adaptation (E1-2)

The policies listed below address the sustainability aspects of climate change mitigation and energy efficiency. Although we have yet to integrate the subtopic of climate change adaptation into our policies, we have taken an initial step by conducting our climate resilience analysis, which we aim to build upon in the future.

The EHS Policy establishes measurable targets for reducing greenhouse gas (GHG) emissions and promotes energy efficiency initiatives across our operations. Complementing this, the Air Emissions Standard sets protocols for monitoring and reducing air emissions, with a strong focus on adopting cleaner technologies to lower GHG emissions. To address specific emissions concerns, the Emissions of Refrigerants Standard regulates the use of refrigerants, emphasizing the importance of leak detection and the transition to low-global warming potential (GWP) alternatives to minimize emissions. Additionally, our Energy Management Standard is dedicated to improving energy efficiency and managing energy consumption, aiming to reduce overall carbon emissions. It includes specific internal guidelines that outline best practices for energy efficiency, such as conducting regular energy audits to identify inefficiencies and implementing corrective measures aimed at reducing energy use. We also recognize the importance of sustainable practices throughout our supply chain, which is why our Supplier Code of Conduct holds suppliers accountable for their environmental practices. This code requires suppliers to report their emissions and implement sustainable practices to align with our environmental goals.

Our actions and resources in relation to our climate change policies (E1-3)

In alignment with our climate change policies outlined in E1-2, we are committed to addressing climate change through a comprehensive transition plan that adheres to the Paris Climate Agreement. This plan encompasses a range of strategic initiatives aimed at significantly reducing our greenhouse gas emissions and enhancing our sustainability practices. These projects cover upstream, our own operations and downstream value chains. Our actions focus on multiple decarbonization levers: energy management, process emissions reduction, material efficiency, mode shift, renewable energy purchase and supplier decarbonization program. For specific targets related to our climate change mitigation efforts, please refer to section E1-4. Not all climate mitigation projects are reflected in the action plan below; only key examples per decarbonization levers are highlighted. The total values for all emission reduction projects per sector give a complete picture of the overall decarbonization taking place. To address emissions in our supply chain, we have implemented a supplier decarbonization program that promotes reduction initiatives beyond our direct control. This program focuses on assessing and enhancing our suppliers’ compliance with the Science Based Targets initiative, increasing the share of renewable electricity used by our suppliers and educating them on emission reduction leavers. While it enables us to track the maturity levels of our suppliers, the reduction impact remains unquantifiable at this stage, as emissions are currently reported based on industry averages rather than primary data. We anticipate that this initiative will have a significant positive effect.

Initiatives in the Life Science business sector

• Energy management: The EDISON program focuses on improving energy efficiency, achieving a reduction of 3,840 tons of CO₂eq in 2024. This program enhances operational efficiency by optimizing energy use in our facilities.
• Process emissions reduction: Our Process Gas Reduction initiative (Freon) reduces our reliance on high-GWP fluorinated carbons, contributing to our overall GHG targets with a Scope 1 reduction of 12,655 tons of CO₂eq in 2024 compared with 2023.
• Material efficiency: The Material Efficiency program focuses on improving yield and reducing production waste in our manufacturing. This contributes to Scope 3 Category 1 reductions. For example, at our Danvers, USA facility, a process improvement resulted in reduced scrap (and thus reduced need for purchased goods) in the manufacturing of our Mobius Single-Use products, avoiding 240 tons CO₂eq in 2024.
• Mode shift: Our Mode Shift program reduces emissions from logistics by focusing on use of sea freight instead of air freight. By the end of September in 2024, this program reduced Scope 3 emissions by 1,862 tons of CO₂eq in 2024 compared with the previous year.
• Time horizons for completion of the above-mentioned projects: The key actions listed under Mode Shift is expected to be implemented by end of 2025, and Material Efficiency by end of 2027. Our Energy Management program is funded through 2030 and does not currently have an end date. Once these time horizons are reached, these programs will remain implemented for continued reductions. Our Process Emissions reduction initiative is expected to be fully implemented by end of 2029.
• Total values for emission reduction projects in Life Science (2024): 19,678 tons of CO₂eq
• Logic/methodology to calculate expected reduction (2024): The reduction for these projects will be determined using various methods. For Energy Management, we factor in projects that were completed in 2024, calculate the expected energy savings per utility, and multiply by the site-specific emission factors to derive the emissions savings. For Process Emissions Reductions, because this is a multi-year program and series of projects, we calculate the absolute reduction in process emissions compared with our 2020 baseline. For Mode Shift, we identify the trade lanes and volumes that were converted from air to ocean freight and calculate the volume-adjusted difference in emissions compared with the previous year. For Material Efficiency, we identify the cost savings resulting from reduction of raw materials purchased to make the same quantity of finished goods and multiply by the raw material's corresponding EEIO emission factor.
• Expected total values for emission reduction projects in Life Science (2025): 15,907 tons of CO₂eq.
• Logic/methodology to calculate expected reduction (2025): The expected reduction for these projects is calculated by subtracting the total projected emissions reductions for 2025 from the total reductions for 2024. This difference shows the stand-alone emissions reduction for 2025. We determine total reductions by identifying all active initiatives in the respective year, estimating how much emissions they will reduce based on the base year (2020), and adjust for business growth in that year.

Initiatives in the Healthcare business sector

• Energy management: We continue to invest in on-site photovoltaic capacity. In 2024, among others we executed a photovoltaic investment in our Jakarta (Indonesia) site as further example of our global ambitions. As a result of this project, we expect to reduce 12% of our site’s emissions. Additionally, we optimize HVAC (heating, ventilation, air conditioning) in our operations network. In the following years, we are committed to continue to invest in climate neutrality, for example, in energy-demanding utilities like water generation.
• Time Horizons for completion of the above-mentioned projects: Continual implementation plan, HVAC (heating, ventilation, air conditioning) and on-site photovoltaics. We are at the end of the implementation cycle, the mentioned water utilities projects will start as of 2025 and will be implemented in the next 3-5 years.
• Logic/methodology to calculate expected reduction (2024): The emission reduction reflects actual reductions in the reporting year. It compares emissions in 2024 with 2023.
• Total values for emission reduction projects in Healthcare (2024): 2,000 tons of CO₂eq
• Expected total values for emission reduction projects in Healthcare (2025): 2,423 tons of CO₂eq
• Logic/methodology to calculate expected reduction (2025): The expected reduction for these projects is calculated by subtracting the total projected emissions reductions for 2025 from the total reductions for 2024. This difference shows the stand-alone emissions reduction for 2025. We determine total reductions by identifying all active initiatives in the respective year, estimating how much emissions they will reduce based on the base year (2020), and adjust for business growth in that year.

Initiatives in the Electronics business sector

• Process emissions reduction: We were implementing NF₃ abatement projects at our Ulsan, South Korea, and Hometown, USA, sites from our Specialty Gases business field to reduce nitrogen trifluoride emissions. Those projects achieved a significant reduction of 385,743 tons of CO₂eq in 2024.
• Time horizons for completion of the above-mentioned projects: The key milestones of these projects were achieved in 2024.
• Total values for emission reduction projects in Electronics (2024): 385,743 tons of CO₂eq
• Logic/methodology to calculate expected reduction (2024): The emission reduction reflects actual reductions in the reporting year. It compares the NF₃ related process emissions in 2023 with 2024 and is net of growth.
• Expected total values for emission reduction projects in Electronics (2025): 195,118 tons of CO₂eq
• Logic/methodology to calculate expected reduction (2025): The expected reduction for 2025 is based on key projects that are anticipated to reach milestones that year, with their total contributions outlined. The most significant projects include the reduction of N₂O process emissions and sourcing additional renewable electricity contracts. Additionally, we will benefit from a full year's contribution from the previously mentioned NF₃ abatement project in Ulsan.

Contribution of decarbonization levers by scope to achieve our targets (2020–2030)

Scope 1 Target: Reduce Direct Emissions by 50% by 2030 (2020 Baseline)

• The primary decarbonization lever is addressing process emissions, particularly NF₃.
• From 2020 to 2024, this initiative contributed to a 53% reduction in Scope 1 emissions. We have achieved our goal ahead of schedule and are working to stabilize the results.

Scope 2 Target: Reduce Indirect Emissions by 50% by 2030 (2020 Baseline)

• The key decarbonization lever is the procurement of renewable electricity, such as through Virtual Power Purchase Agreements (VPPAs).
• From 2020 to 2024, we reduced our Scope 2 emissions by 30%.

Scope 3 Target: By 2030, we want to reduce our emissions along the entire value chain (Scope 3) by 52% in relation to our gross profit. (2020 Baseline)

• The primary decarbonization lever is our Supplier Decarbonization Program, designed to reduce emissions across our supply chain by promoting initiatives beyond our direct control.
• The program focuses on assessing and enhancing supplier compliance with the Science Based Targets initiative, increasing the share of renewable electricity used by suppliers and educating suppliers on emission reduction levers to drive actionable change.
• While this program tracks the maturity levels of our suppliers, the reduction impact cannot yet be quantified, as emissions are currently calculated using industry averages rather than primary data. Nevertheless, we anticipate that this initiative will yield a significant positive impact in the long term.

Financial resources for climate mitigation

In 2024, we allocated € 46 million of capital expenditure (CapEx) to the previously mentioned actions in relation to process emissions, which are included in the respective lines of balance sheet. No significant operating expenditures (OpEx) were allocated. For 2025, we intend to allocate € 18 million of CapEx and no significant OpEx.

In 2024, we allocated € 10 million of capital expenditure (CapEx) to the previously mentioned actions in relation to energy management which are included in the respective lines of balance sheet. No significant operating expenditures (OpEx) were allocated. These allocations comply with the key performance indicators outlined in Commission Delegated Regulation (EU) 2021/2178. For 2025, we intend to allocate € 12 million of CapEx and no significant OpEx.

Not all climate mitigation projects are reflected in the figures above; only our most important actions for decarbonization levers are included.

Climate adaptation measures

While our primary focus is on climate change mitigation, we recognize the importance of adaptation. We have taken initial steps by investing in insurance premiums to protect against physical risks associated with climate change. This proactive measure enhances our resilience in the face of climate-related challenges.

Resource availability and allocation

Our ability to implement these actions depends significantly on the availability and allocation of resources. Ongoing access to finance at an affordable cost of capital is critical for the execution of our strategies. This includes adjustments to supply and demand changes, related acquisitions, and significant research and development (R&D) investments. Ensuring resource availability is a priority to maintain progress toward our climate objectives. To achieve our climate mitigation goals, we are currently exploring state-of-the-art technologies available in the market, as they will be essential for enhancing our operational efficiency and implementing innovative solutions.

Monitoring and reporting

We have established mechanisms to monitor progress, ensuring alignment with climate objectives. Regular updates are provided to stakeholders. The collection of metrics related to climate protection has not been separately validated by an external party.

Our targets in connection with climate change mitigation and climate change adaptation (E1-4)

The goals outlined below concentrate on the sustainability matters of climate mitigation, energy efficiency. While we have not yet incorporated climate adaptation into our targets, we have made strides through our resilience and climate scenario analysis, which we plan to further develop. For detailed information on our methodologies, metrics, and progress against our targets, please refer to E1-6. Additionally, for a comprehensive overview of our decarbonization levers, see E1-3, and for an overview of our policies, see E1-2. 

We have considered future developments by continuously monitoring emerging trends and innovations, as detailed in our transition plan (see E1-1), which will inform our strategies and potentially impact both our GHG emissions and emissions reductions. We additionally report our Scope 1, 2 and 3 targets under ESRS 2 (SBM-1) as it is one of our strategic sustainability key indicators used to gauge the success of our climate mitigation efforts.

Energy consumption and mix (E1-5)

Understanding our energy consumption and the energy sources contributing to our energy mix is crucial for reducing our environmental impact. Below, we provide an overview of our current energy consumption, the share of renewable and non-renewable energy sources, and the steps we are taking to improve our energy efficiency. By analyzing our energy consumption and mix, we aim to identify opportunities for improvement to advance our commitment to climate neutrality and align with global sustainability targets. As per to the ESRS definition, all our business activities are considered to have a high climate-impact.

Energy consumption and mix

The following table outlines our total energy consumption in MWh, disaggregated by source:

Our sites collect energy data through our central reporting tool for EHS data (Environment, Health, and Safety). This centralized approach is intended to ensure consistent and accurate reporting across all sites.

The following methodological details apply to all energy consumption metrics:

• Fuel consumption from coal and coal products, crude oil and petroleum products, natural gas, and other fossil sources: Fuel consumption data are derived directly from reported figures, ensuring accuracy without reliance on estimates.
• Consumption of purchased or acquired electricity, heat, steam, and cooling from fossil sources: This includes energy sourced from third parties, tracked through contracts and invoices.
• Total consumption of fossil energy: This is calculated as the sum of all the fossil energy sources listed above.
• Consumption from nuclear sources: The calculation is based on estimates, utilizing data from the scientific online publication "Our World in Data."
• Fuel consumption for renewable sources, including biomass: This metric includes energy from renewable materials, collected at the sites.
• Consumption of purchased or acquired electricity, heat, steam, and cooling from renewable sources: This includes renewable energy sourced from third parties, also tracked through contracts and invoices.
• Self-generated renewable energy (excluding fuels): This refers to renewable energy generated on-site, such as solar or wind energy, determined through production metrics.

Energy production

The energy generation associated with our activities is summarized in the following table:

The following methodological details apply to all energy generation metrics:

• Renewable energy generation: This metric includes energy generated from renewable sources such as solar, wind, and biomass. The data are collected through energy reports and production metrics from the sites, capturing the amount of renewable energy generated on-site.
• Non-renewable energy generation: This metric includes energy generated from non-renewable sources. The figures are based on actual generation data from the Darmstadt/Gernsheim sites and an estimate for other sites based on their reported energy consumption and an average energy generation efficiency value.

Energy intensity based on net sales

The energy intensity associated with our activities, is summarized in the table below:  

• Total energy consumption: This figure represents the combined energy used across all activities. The data is directly sourced from energy usage reported by sites via an internal tool, ensuring accuracy without relying on external estimates.
• Net sales: The net sales figures are taken from our annual report, which amounted to € 21,156 million in the fiscal year 2024.
• Energy intensity calculation: Energy intensity is determined by dividing the total energy consumption (in MWh) by net sales (in million euros) generated. This metric enables the assessment of energy efficiency in relation to economic output, enabling meaningful comparisons over time and across operational units.

Our greenhouse gas emissions (gross and net) in the categories of Scope 1, 2 and 3 (E1-6)

Understanding our greenhouse gas emissions is crucial for assessing our environmental impact and enhancing our sustainability initiatives, particularly regarding our goal to reduce emissions. This section provides an overview of our gross greenhouse gas emissions across all three scopes, as well as our total greenhouse gas emissions. By analyzing these emissions, we aim to identify areas for improvement, set meaningful reduction targets, and work toward climate neutrality.

Biogenic CO₂ emissions

The following table outlines the biogenic CO₂ emissions not included in the gross GHG emissions calculations for the year 2024:  

The methodologies for calculating biogenic CO₂ emissions are as follows:

• Gross Scope 1 GHG emissions: These emissions are calculated based on the total direct emissions from owned or controlled sources, excluding biogenic CO₂ emissions. Data are sourced from operational records and emissions inventories.
• Gross Scope 2 GHG emissions (market-based): This figure reflects the indirect emissions from the consumption of purchased electricity, heat, or steam, calculated using market-based methods. The data are collected from utility bills and energy procurement documents.
• Limitations and uncertainties include partially manual processes at the site level, which pose a risk of erroneous data input, and the early deadlines for year-end reporting, which make it necessary to rely partially on estimates.

Share and types of contractual instruments

The following table provides an overview of the share and types of contractual instruments that we used to procure energy in 2024. The table shows both bundled and unbundled instruments:

The methodologies for calculating the share and types of contractual instruments are as follows:

• Share of energy procured via bundled contractual instruments: This metric includes the percentage of energy procured through bundled contracts, which provide both energy and associated renewable attributes (certificates). Data are collected from procurement contracts and energy invoices.
• Share of energy procured via unbundled contractual instruments: This metric includes the percentage of energy procured through unbundled contracts, which provide energy separately from their renewable attributes and renewable energy certificates of the same size will be procured separately. Data are collected from procurement contracts and energy invoices.

Assumptions made in calculating these metrics include:

• The classification of contractual instruments as bundled or unbundled is based on the definitions set forth in relevant regulatory guidelines, such as the Green House Gas Protocol for Scope 2, which provides a framework for renewable energy sourcing and accounting.

Gross Scope 1, 2 and 3 GHG emissions and total GHG emissions

The following table shows the gross GHG emissions from Scope 1, 2, and 3, as well as the data on total greenhouse gas emissions for the years 2020, and 2024. It includes milestones and targets, providing a comprehensive overview of our greenhouse gas emissions and the progress made toward achieving our sustainability goals. While our calculations indicate that Scope 3 emissions derived from primary data are minimal, we are committed to continuously improving our data collection processes.

The GHG inventory covers the majority of our sites under operational control. Especially, the manufacturing sites causing the majority of GHG emissions are covered completely. We have two plants subject to EU-ETS at Darmstadt and Gernsheim in Germany, as well as the Ulsan site in South Korea, which is subject to an emission trading scheme.

Merck KGaA, Darmstadt, Germany, accounted for the following shares of total greenhouse gas emissions: In 2024, its Scope 1 greenhouse gas emissions amounted to 18,413 metric tons of CO₂eq. Its Scope 2 greenhouse gas emissions were 3,416 tons CO₂eq, calculated using the site-based method, and 6,704 tons CO₂eq, calculated using the market-based method. As Merck KGaA, Darmstadt, Germany, has no significant business activities, the Scope 3 greenhouse gas emissions are negligible.

Greenhouse gas emissions in metric kilotons of CO₂eq, Scope 1 and 2

GHG intensity per net sales

The following table outlines the GHG intensity per net sales for the fiscal year 2024:  

The methodologies for calculating GHG intensity are as follows:

• Total GHG emissions: GHG emissions are calculated using both location-based and market-based methods. The calculations are derived from comprehensive emissions inventories that account for all relevant sources of greenhouse gas emissions across our operations.
• Net sales are equivalent to net sales as stated in the Annual Report, € 21,156 million.
• The GHG intensity is calculated by dividing the total GHG emissions (in metric tons CO₂eq) by the net sales (in million euros). This metric allows us to evaluate the efficiency of our operations in relation to our economic output.

In accordance with the Greenhouse Gas Protocol (GHG Protocol), we distinguish between the following sources when calculating our Scope 1 emissions:

• Stationary combustion: production unit, plant, setup of local plants, for example, through the use of oil or gas
• Mobile combustion: dispensing at own filling stations
• Process-related emissions: physical or chemical processes during internal production or through other industrial processes
• Diffuse emissions: coolants or other gases that are released intentionally or unintentionally

The data basis for emissions from stationary combustion as well as for fuels dispensed at our own filling stations is our energy bills in combination with the corresponding emission factors. We obtain the emission factors from the GHG Protocol. To calculate process-related emissions, we use internal production data in combination with the corresponding emission factors, which we obtain from the Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC). We account for diffuse emissions by mainly using data from the invoices for the maintenance of our plants and combining these with the corresponding emission factors that we obtain from the IPCC's Sixth Assessment Report.

All calculations are carried out in our central reporting tool for EHS data. In accordance with the GHG Protocol, we distinguish between the sources of purchased or acquired electricity, steam, heat, and cooling when calculating our location-based Scope 2 emissions. We consider steam and heat together.

The data basis for all four sources is made up of our energy bills in combination with the corresponding emission factors. We obtain the emission factors for purchased electricity from the International Energy Agency (IEA) and the U.S. Emissions & Generation Resource Integrated Database (eGRID). The emission factors for steam, heat, and cooling are sourced from the UK Department for Environment, Food & Rural Affairs (DEFRA). We also calculate the market-based Scope 2 emissions in accordance with the GHG Protocol in all four categories. We follow the hierarchy of the GHG Protocol regarding emission factors: We use supplier-specific emission factors reported by our sites, residual mix factors (AIB for Europe, Green-e for the United States), and location-based emission factors. All calculations are carried out in our central reporting tool for EHS data.

We report our Scope 3 emissions according to the 15 categories of the GHG Protocol:

Category 1 includes all upstream emissions from the extraction, production, and transportation of goods and services that were purchased or acquired in the reporting year. Emissions from products are calculated using a spend-based approach based on a procurement data management system (which integrates various ERP systems) and environmentally extended input-output (EEIO) data (source: US Environmentally-Extended Input-Output (USEEIO) Technical Content, United States Environmental Protection Agency). USEEIO provides emission factors on a spend basis for different industrial sectors and does not consider regional differences. Emissions from services are calculated with a spend-based approach based on the same procurement data management system. The calculation method takes into account the emission data of our main suppliers. The procurement system contains 95–97% of our total spend, meaning there is a minor underreporting. This gap is related to our subsidiaries that either do not have their own procurement system or have a very specific system (e.g., a small local ERP system). To further increase accuracy, we are working on a weight-based approach. Our target is to calculate these emissions based on supplier-specific data.

Category 2 includes all upstream emissions from the extraction, production, and transportation of capital goods purchased or acquired by the reporting company in the reporting year. As with category 1, emissions are calculated using a spend-based approach based on a procurement data management system (which integrates various ERP systems) and environmentally extended input-output (EEIO) data (source: US Environmentally-Extended Input-Output (USEEIO) Technical Content, United States Environmental Protection Agency). USEEIO provides emission factors on a spend basis for different industrial sectors and does not consider regional differences. The procurement system contains 95–97% of our total spend, meaning there is a minor underreporting. This gap is related to our smaller subsidiaries that either do not have a system or have a very specific system (e.g., a small local ERP system). The target is to calculate these emissions based on supplier-specific data.

Category 3 includes emissions related to the production of fuels and energy purchased and consumed by the reporting company in the reporting year that are not included in category 1 or 2. Data on purchased and consumed fuels (mainly natural gas) and electricity, steam/heat, and cold, which form the basis for calculating category 3 emissions, are collected via our central EHS data management system. To determine upstream emissions of purchased fuels, we multiply the fuel quantities by the well-to-tank emission factors (source: DEFRA, WTT – fuels). Upstream emissions as well as transportation and distribution losses of purchased heat/steam and cold are calculated by multiplying the consumption figures with the respective emission factors (source: DEFRA; WTT – heat and steam, WTT – heat and steam – district heat and steam, respectively DEFRA; WTT – heat and steam, WTT – distribution of district heat and steam, 5% loss for losses). To calculate emissions from the generation and transport and distribution (T&D) of minor quantities of purchased cold, we use the same emission factors as for heat/steam, as no specific factors are available. Upstream emissions from purchased electricity are determined by multiplying the consumption figures with the respective emission factors (source: DEFRA; WTT – overseas electricity [generation]). Here, electricity purchased from renewable sources is deducted (direct supply of renewable electricity as well as electricity covered by energy attribute certificates). Electricity T&D losses are determined based on the quantities of electricity purchased and country-specific loss factors. The data from the IEA provide the basis for country-specific electricity transmission and distribution losses. In this process, the electricity sourced from renewable sources (direct supply of renewable electricity) is deducted. Emissions from the generation of purchased electricity sold to end-users are not relevant for us because we do not sell electricity.

Category 4 includes the transportation and distribution of products purchased by the reporting company in the reporting year. This refers to transportation and distribution between the company's tier 1 suppliers and its own operations, where the vehicles and facilities are not owned or controlled by the reporting company. Additionally, category 4 includes the transportation and distribution of services purchased by the reporting company in the reporting year. This includes both inbound logistics and outbound logistics, such as for sold products, as well as transportation and distribution between the company's own facilities in vehicles and facilities not owned or controlled by the reporting company. To calculate emissions from these transportation activities, we use a mixed approach. Primary data from logistics service providers are provided by them and integrated into the reporting. If these data are not available, greenhouse gas emissions are calculated by a third-party provider using an energy-based bottom-up approach. For the Life Science business sector, shipment data from forwarders serve as the main data source, while for the Electronics business sector, delivery notes from our own ERP systems form the basis for calculation. For the Healthcare business sector, there are multiple sources: forwarder data as well as data from various ERP systems. These data are consolidated in internal systems together with primary data from suppliers/logistics service providers. The respective shipment data are sent to the third-party provider EcoTransIT and processed there. Processing steps include routing from origin to destination based on zip and port codes, determination of fuel consumption, energy and emission calculation, and summing up all section emissions per mode of transportation. For our Life Science business sector, no data on road transportation for the LATAM and Asia regions are available. Therefore, a spend-based approach is used to estimate these emissions. If data for the entire year is not yet available, appropriate extrapolations based on previous year data are conducted. Currently, we do not consider deliveries from tier 1 suppliers that are not directly paid by us but are delivered to us due to lack of data.

Category 5 includes emissions from the disposal and treatment of waste generated in facilities owned or controlled by us. This also includes the disposal of solid waste and wastewater by third parties. The calculation of emissions from waste generated in operations and disposed of by third parties is based on primary data from our manufacturing sites, collected annually via our central EHS data management system. These data are divided into various waste types, such as solvent waste and soil waste, and distinguished by waste disposal methods, such as waste-to-energy, landfill, or recycling. For the emission factors based on the carbon content of the waste, we use the "Guidance for Accounting & Reporting Corporate GHG Emissions in the Chemical Sector Value Chain." This states that recycling and energy recovery are attributed to the organization that uses the recycled material or uses the waste to generate energy. This means emissions from these activities are not included in our greenhouse gas inventory. The carbon content factors are mainly taken from the "2006 IPCC Guidelines for National Greenhouse Gas Inventories." These data are then multiplied with each other. Emissions resulting from the transportation of waste materials are not taken into account. To calculate greenhouse gas emissions from wastewater treatment in third-party municipal or industrial wastewater treatment plants, we use primary data from our manufacturing sites, collected annually via our central EHS data management system. Wastewater quantities are multiplied by the DEFRA emission factor for water treatment.

Category 6 includes emissions from the transportation of employees for business-related activities in vehicles owned or operated by third parties, such as aircraft, trains, buses, and passenger cars.

• Air travel: Based on our flight booking and billing processes, our payment solution service provider supplies detailed data on all flights booked. Greenhouse gas emissions are calculated by atmosfair, a recognized non-governmental organization dealing with climate protection focused on travel.
• Rail travel: Rail travel is considered relevant in some European countries, such as Germany, France, and Spain. In non-European countries, it is considered rather negligible. Currently, data for rail travel are only available for Germany and is provided by Deutsche Bahn AG.
• Rental cars: Emissions data are provided by our global rental car providers on an annual basis. Data on other means of transportation, such as trams, taxis, and buses, are not available. Their impact on our overall emissions is expected to be negligible.
• Hotel accommodation: Emissions from hotel stays are calculated based on the number of hotel stays per country (source: internal ERP system) and the DEFRA emission factors for hotel stays.

Category 7 includes emissions from the transportation of employees between their homes and work. We conduct a global Employee Engagement Survey each year. The Covid-19 pandemic has changed working habits toward a more flexible remote working approach. Given this fact and our ambition toward more transparency and accuracy on greenhouse gas emissions, we have included commuting habits in the employee engagement survey as of 2023. This allows us to build our calculation on a solid basis and extrapolate to the global employee population. This is combined with the assumption of 220 working days derived from the "Guidance for Accounting & Reporting Corporate GHG Emissions in the Chemical Sector Value Chain." Emission factors for modes of transport are taken from DEFRA, business travel, and include electric vehicles and working from home.

Category 8 includes emissions from the operation of assets that are leased and that are not already included in our Scope 1 or Scope 2 reporting. Emissions from this category are not relevant for our Scope 3 reporting because leased assets, such as rented offices, labs, or warehouses, are part of our Scope 1 and 2 GHG inventory.

Category 9 includes the transportation and distribution of products sold by the reporting company in the reporting year from the reporting company's operations to end consumers, if not paid for by the reporting company. This also includes retail and storage in vehicles and facilities not owned or controlled by the reporting company. The calculation of category 9 emissions is similar to that of category 4. The emissions are calculated by a third-party provider using an energy-based bottom-up approach. This way, we can provide emissions data for our Healthcare and Electronics business sectors. The downstream data of category 9 from the Life Science business sector is negligible. To ensure the effectiveness of logistic processes, the transport of Life Science products is organized and contracted by us and is therefore covered under category 4.

Category 10 includes emissions from the processing of sold intermediate products by third parties (e.g., manufacturers) after sale by the reporting company. We produce a wide variety of intermediate products for various purposes. Due to the range of potential applications and our customer structure, the related greenhouse gas emissions cannot be tracked in a practical manner. It is difficult to obtain reliable figures. We adhere to the recommendation of the "Guidance for Accounting and Reporting Corporate GHG Emissions in the Chemical Sector Value Chain" of the World Business Council for Sustainable Development, which states: "Chemical companies are not required to report Scope 3, category 10 emissions, since reliable figures are difficult to obtain, due to the diverse application and customer structure."

Category 11 includes emissions from the use of goods and services sold by the reporting company in the reporting year. Internal expert assessments of our extensive and very diverse product portfolio show that for us, "greenhouse gases and products that contain or form greenhouse gases that are emitted during use" are the main driver of greenhouse gas emissions in this category. "Products that directly consume energy (electricity) during use" contribute to a much lesser extent to the overall emissions. "Fuels and feedstocks" as well as indirect use-phase emissions are not relevant for us. "Indirect use-phase emissions" are optional and are not reported by us. Electronics business sector: Among our Electronics product portfolio, there are some specialty gases with high Global Warming Potential (GWP) that are emitted during the use phase. Emissions are calculated based on the technical expertise of internal experts on the percentage of gas quantities that escape the processes at our customers, abatement efficiency, sales volumes, and global warming potentials (source: IPCC, 6th Assessment Report). Besides this, some product control devices consume electricity. Emissions of these devices are calculated based on runtime, average lifetime, and an estimated global emission factor. Other product lines are negligible or do not contribute at all to the overall emissions within this category. Our Life Science business sector offers two product lines (Biology, Biomonitoring, Chemistry, LabWater, and Process Solutions portfolios) that consume electricity during the use phase. The calculation of emissions is based on internal expert estimations of the product energy consumption, sales volumes, and respective emission factors per country (source: IEA). Sales data covers approximately 90–95% of sales. Our Healthcare business sector offers some battery-based injection devices that fall under category 11. Emissions are calculated based on energy consumption, sales volumes, and the respective emission factors per country (source: IEA). Compared with other Scope 3 categories, the screening of the emissions in this category contains more uncertainties and is meant to provide an initial indication of the impact of these Scope 3 emissions.

Category 12 includes emissions from the waste disposal and treatment of products at the end of their life, sold by the reporting company in the reporting year. Emissions from the disposal of sold products and respective packaging materials are calculated based on sales data, the weight data of products and packaging material, average weighted emission factors based on statistical data on regional disposal methods, and DEFRA emission factors (source: DEFRA).

Category 13 includes emissions from the operation of assets owned by the reporting company (acting as lessor) and leased to other entities. In Darmstadt, we are the lessor of a number of residential and commercial buildings. Emissions are calculated based on building master data, such as energy demand from energy certificates, and respective emission factors. To split the energy demand into heating and electricity for residential and commercial buildings, we use data from the IEA. Emissions from heating energy are calculated using the fuel type and DEFRA emission factors. Emissions from electricity demand are calculated using the German grid emission factor provided by BDWE (Bundesverband der Energie- und Wasserwirtschaft e.V.).

Category 14 includes emissions from the operation of franchises. This category is not relevant for us as we do not operate franchises, i.e., businesses operating under a license to sell or distribute another company’s goods or services within a certain location. Out-licensing in the pharmaceutical sector is not regarded as franchising.

Category 15 includes emissions from the operation of investments, including equity and debt investments and project finance, in the reporting year, which are not included in Scope 1 or Scope 2. Emissions are calculated based on the direct share of capital, the respective annual revenue, and environmentally extended input-output (EEIO) data (source: US Environmentally Extended Input-Output (USEEIO) Technical Content, United States Environmental Protection Agency). USEEIO provides emission factors on a spend basis for different industrial sectors and does not consider regional differences.

Removal of greenhouse gases from the atmosphere and CO₂eq certificates (E1-7)

As part of our own business activities, we do not currently carry out any activities to remove or reduce greenhouse gases that we finance via CO₂eq certificates. 

Our internal CO₂ pricing (E1-8)

While GHG emissions are generally considered in our R&D and product development processes, a dedicated carbon pricing scheme is applicable for major investment projects. In the respective CapEX projects, we use a shadow price of € 100 per ton of CO₂eq equivalent which is applied globally. This shadow price is informed by the guidance of EU ETS (the European Union Emission Trading System) on carbon price monitoring and was also determined through a peer review analysis. It ensures the integration of greenhouse gas emission criteria early in the project development stage and is used for CapEX projects exceeding € 10 million, and those over € 2 million with high sustainability impact.

As this carbon pricing scheme is geared towards avoiding or reducing GHG emissions in the future, it is not applicable to actual emissions in the current year. For the same reason, carbon pricing considerations do not impact the value of existing assets in the Financial Statements.