Lenzing Group Wood and pulp Issue March 2021

Issue March 2021 - page 1 Table of Contents

Lenzing’s “Naturally positive” sustainability strategy ...... 5 The cellulose cycle – from nature back into nature ...... 6 Responsible sourcing of wood and dissolving wood pulp ...... 7 Management of sustainable wood and pulp sourcing ...... 8 Centrally managed wood and pulp procurement ...... 8 Lenzing’s Wood and Pulp Policy ...... 9 Global Supplier Code of Conduct ...... 10 Wood and dissolving wood pulp certification in the Lenzing Group...... 10 History of responsible wood and pulp sourcing in the Lenzing Group ...... 14 Lenzing’s reliable partners: small-scale forest owners and strict European forestry laws...... 15 Regional wood supply for Lenzing’s own pulp mills ...... 15 Regional wood sourcing in Central Europe ...... 15 Local wood supply in Brazil ...... 18 Pulp suppliers to the Lenzing Group from the global market ...... 19 Stakeholder dialog ...... 20 CDP Forest ...... 20 Supporting forest conservation ...... 20 Forest Europe and national forest strategies ...... 20 The European and Austrian bio economy strategy ...... 21 Austrian Forest Strategy and Austrian Forest Dialog ...... 21 CanopyStyle Initiative ...... 22 WOOD Kplus competence center ...... 22 Greenhouse Gas Protocol process on carbon removals/land use ...... 23 FSC® - Forest Stewardship Council® ...... 23 PEFCTM- Program for the Endorsenment of Forest Certificates ...... 23 UNECE/FAO/PEFC™ Fashion for Forests Initiative...... 23 Are there alternative cellulose sources? ...... 24 REFIBRA™ technology (Eco Cycle technology) ...... 24 Lenzing’s circular economy vision ...... 25 Three pillars of the vision ...... 25 Other alternative cellulose sources...... 26 Sustainability aspects in wood and pulp sourcing ...... 28 Sustainable forest management ...... 28

Issue March 2021 - page 2 Forests are more than raw material for production ...... 29 Biodiversity in sustainably managed forests and plantations ...... 30 Societal aspects of forestry ...... 33 Forestry and climate change ...... 34 Climate protection by use of forest products ...... 34 Climate change effects on forests and plantations ...... 35 Water and forestry ...... 36 Global forests and wood resources ...... 37 The global wood market ...... 37 Sustainable basis for wood Lenzing sourcing in Europe ...... 38 Technology of pulp production: the biorefinery concept ...... 39 Responsible pulp bleaching ...... 40 New dissolving pulp mill in Brazil ...... 40 Annex ...... 41 Glossary ...... 41 Index of figures ...... 43 Index of tables ...... 43 References and Endnotes ...... 44

Imprint

Lenzing Group, Focus wood and pulp

Issue March 2021, information status is end–year of 2020.

Editorial team: K. Christian Schuster, Angelika Guldt, Nenad Šimunović, Andrea Promberger, Andrea Steinegger

Inquiries to: K. Christian Schuster, e-mail: [email protected]

Issue March 2021 - page 3 Wood and pulp

Growing global demand for wood-based biomass and alternative land use put pressure on the world’s forests, which provide fresh water, oxygen, climate regulation, flood resilience, biodiversity, recreation, and valuable raw materials to society.

We care for wood in all its aspects. Therefore, our focus is on sustainable sourcing through certifications, responsible consumption and highly efficient use of wood through biorefinery, supported by internal and external expertise.

We promote conservation solutions to protect ancient and endangered forests. Innovation of alternative cellulose sources is a strategic priority for the Lenzing Group, for example textile recycling.

Issue March 2021 - page 4 Lenzing’s “Naturally positive” sustainability strategy

“Naturally positive”, the Lenzing Group’s sustainability strategy, was developed from the results of the materiality analysis and is firmly rooted in the Lenzing Group’s sCore TEN strategy. Within the dimensions People – Planet – Profit, this strategy defines those seven strategic focus areas where Lenzing can do the most to create a more sustainable world. It is the basis for Lenzing’s approach for contributions to the United Nations’ Sustainable Development Goals (SDGs).

Lenzing’s wood and pulp supply is connected to all of these focus areas, but especially to:  Raw material security  Decarbonization  Partnering for systemic change

According to the materiality analysis for sustainability reporting, Raw material security / Wood and pulp supply is the top material topic for Lenzing.

Figure 1: Lenzing’s sustainability strategy “Naturally positive” and UN Sustainable Development Goals

The SDGs are a collection of 17 goals adopted by all Member States of the United Nations in 2015 to address global economic, social, and environmental challenges and achieve a more sustainable future by 2030. Guided by its sustainability strategy “Naturally positive”, and in particular by the principles laid down in the Lenzing Wood and Pulp Policy, the Lenzing Group is committed to contribute to the UN Sustainable Development Goals by its careful wood and pulp sourcing. For more information on Lenzing’s approach to the SDGs, please see the “Sustainable Development Goals” focus paper.

Issue March 2021 - page 5 To set the pathway of the ambitions in the strategic focus area “Raw material security”, a number of targets have been defined:

Table 1: Sustainability targets regarding strategic focus area "Raw material security"

The cellulose cycle – from nature back into nature

The cellulose cycle is the basis for Lenzing’s business model and provides opportunities to address some of the most challenging societal topics, such as climate change or emerging circular economy solutions.

LENZING™ fibers are made from dissolving wood pulp and are part of a closed natural material cycle, the “cellulose cycle”.

It starts with photosynthesis, a biochemical process that produces the organic building blocks for all plant life on earth from carbon dioxide and water by utilizing energy from the sun. One of its major products is the world’s most important biological construction material, cellulose. The biopolymer cellulose is used by the Lenzing Group for fiber production. At the end of their useful life, the fibers can biodegrade to their original Figure 2: The cellulose cycle compounds: carbon dioxide and water.

The principle of photosynthesis

Figure 3: The principle of photosynthesis

Issue March 2021 - page 6 Responsible sourcing of wood and dissolving wood pulp

Wood and dissolving wood pulp are Lenzing’s most important raw materials. The Lenzing Group assumes responsibility by focusing on sustainable sourcing covered by certifications, responsible consumption, and highly efficient use of these valuable resources. Lenzing sources wood and dissolving wood pulp from semi-natural forests and plantations (as defined by Food and Agriculture Organization of the United Nations1), not from natural or ancient and endangered forests.

Precise figures for the absolute amount of wood purchased and dissolving wood pulp sourced are not provided for confidentiality reasons. As an indicative estimate, total fiber sales of nearly 1 million tons require a pulp input of about the same amount. The amount of wood required to produce this dissolving wood pulp cannot be stated exactly, especially given all the different processes and species that our suppliers use. Assuming a dissolving wood pulp yield from wood of 40 percent, a rough estimate for the total wood input would be 2.5 million tons (dry matter), split up between Lenzing’s own production and purchased dissolving wood pulp.

Wood as a natural and renewable raw material plays an important role in replacing fossil-based products and helps mitigate climate change through carbon sinks in forests and wood products. For more information on climate effects of and on wood and pulp sourcing, see chapter “Foresty and Climate Change” below.

To ensure responsible sourcing of wood and pulp, Lenzing follows these guiding principles and due diligence processes:

Guiding principles  Centrally managed wood and pulp procurement  Strict Wood and Pulp Policy  CanopyStyle Initiative  Global Lenzing Supplier Code of Conduct  Preference for long-term contracts and direct contacts

Due diligence processes  Regular audits on wood certification standards (FSC®, PEFC™)2  Internal audit management system  Wood and pulp certification according to FSC® and PEFC™ standards  Additional third-party verification as part of the CanopyStyle Initiative and internal supplier audits

Issue March 2021 - page 7 Management of sustainable wood and pulp sourcing

Centrally managed wood and pulp procurement Processing wood into fibers requires a special quality of pulp for an intermediate step. This intermediate is called dissolving wood pulp. It has a higher cellulose content than paper pulp and has to meet special purity requirements for criteria such as non-soluble particles content.

The Lenzing Group sources dissolving pulp for its fiber production in two ways (Figure 4): from its own pulp mills, and in the open global market, mostly under long-term supply contracts.

Sourcing of wood and dissolving wood pulp – the value chain

Figure 4: Sourcing of wood and dissolving wood pulp – the value chain

Wood purchasing and pulp purchasing are handled by different teams In addition to its own within the Lenzing Group (Wood Procurement, Pulp Trading GmbH). Lenzing aims to minimize purchasing risks such as major price dissolving wood pulp fluctuations and supply bottlenecks through reliable, long-term supply production in the facilities relationships and active supplier management. in Lenzing, Austria and

Supplier selection and evaluation is based on environmental, social, Paskov, Czech Republic, and governance standards (ESG) as well as economic criteria. Lenzing procures dissolving wood pulp in All of the Lenzing Group’s suppliers are evaluated for sustainability in the global market. the production chain. Lenzing conducts regular audits as well as specific evaluations of both new and established suppliers for sustainability and compliance with environmental and safety standards.

Issue March 2021 - page 8 Suppliers are interviewed regularly and evaluated under environmental and safety aspects with the support of external experts. A final assessment is then conducted. It affects the overall supplier assessment and constitutes a major criterion for long-term cooperation with suppliers. All suppliers must comply with the Lenzing Global Supplier Code of Conduct. In addition, wood and pulp suppliers have to comply with the Wood and Pulp Policy and meet or exceed the criteria for Controlled Wood by FSC® standard, which is part of the due diligence process. Pulp is purchased with a minimum requirement of FSC® Controlled Wood standard. For wood procurement, Lenzing applies its own due diligence system (DDS) – see box page 11.

In 2020, the Lenzing Group’s own dissolving wood pulp production at its sites in Lenzing (Austria) and Paskov (Czech Republic) was 62.4 percent (2019: 61.8 %, 2018: 60%) of the planned dissolving wood pulp volume required for the planned fiber production. Sufficient quantities of wood are purchased for this purpose. In addition to its own dissolving wood pulp production, Lenzing procures dissolving wood pulp in the global market, mostly under long-term supply contracts.

The Lenzing Group’s long-term strategy is to increase its own dissolving wood pulp capacities to up to 75 percent of its requirements. For updates on this target, please see the yearly sustainability reports. To approach this goal, in December 2019, Lenzing announced plans to build a 500,000-ton dissolving wood pulp plant in the state of Minas Gerais (Brazil). It started to implement this investment in a joint venture with the Brazilian Duratex group. Lenzing holds a 51 percent stake, Duratex 49 percent. The expected industrial capital expenditure (CAPEX) in the joint venture will be approx. USD 1.38 bn (based on exchange rates at year-end 2019).

Lenzing’s Wood and Pulp Policy In its Wood and Pulp Policy3, Lenzing is committed to procuring wood and dissolving wood pulp exclusively from non-controversial sources.

Controversial sources include wood which has been harvested  illegally,  from forests of high conservation value, including ancient and endangered forests, and endangered species habitats,  from plantations established after 1994 through significant conversion of natural forests or converted to non- forest use,  from forests or plantations growing genetically modified trees,  in violation of traditional, community, and/or civil rights, or  in violation of any of the ILO4 Core Conventions as defined in the ILO Declaration on Fundamental Principles and Rights at Work.

Following these principles, Lenzing is generally committed to avoiding wood and pulp from such regions as the Canadian and Russian boreal forests, coastal temperate rainforests, and tropical forests of Indonesia, Amazonia and West Africa. If Lenzing sources from these regions, Lenzing strives that these sources are at minimum certified by FSC®, that science-based conservation planning is supported from that area, and conservation solutions are supported to protect such ancient and endangered forests.

Regular risk assessments, audits, on-site visits and independent third-party certification of sustainable forest management programs ensure compliance with the policy. If Lenzing discovers that it has sourced wood or dissolving wood pulp from controversial sources, it will first engage with the supplier to encourage practices consistent with Lenzing’s Wood and Pulp Policy. If the response is unsatisfactory, the supplier will be eliminated with a reasonable lead-time. Very few such cases have occurred in recent years. There were none in 2018 and 2019 and three in 2020. For more information, please see Sustainability Report 2020, page 63.

Issue March 2021 - page 9 Lenzing also strives to establish long-term partnerships with its wood and pulp suppliers and seeks to do business personally and directly with forest owners and pulp mills.

For more details about Lenzing’s Wood and Pulp Policy see: https://www.lenzing.com/en/sustainability/resources/wood-and-pulp/

Global Supplier Code of Conduct The Lenzing purchasing departments operate in accordance with the ethical, ecological, social, and economic principles described in the company’s Global Code of Business Conduct (CoBC). The selection and evaluation of suppliers is also based on environmental, social, and governance standards (ESG).

The Global Supplier Code of Conduct outlines Lenzing’s expectations for supplier conduct with regard to health and safety at work, labor and human rights, environmental protection, ethics, and management practices. Consequently, Lenzing’s suppliers are required to provide safe working conditions, treat employees with respect, act fairly and ethically, and use environmentally responsible practices wherever they manufacture products or perform services on behalf of the Lenzing Group. By setting strict requirements, the Global Supplier Code of Conduct helps promote an environmentally and socially conscious supply chain.

Wood and dissolving wood pulp certification in the Lenzing Group Lenzing’s wood procurement management system ensures that all wood is sourced from legal and sustainably managed sources. The following figures show the certification status of all wood input into Lenzing’s production, whether obtained directly through own procurement for in-house dissolving wood pulp mills or indirectly through dissolving wood pulp suppliers. The basis for the percentage is dissolving wood pulp by weight, in order to summarize both inputs in a consistent way.

Lenzing demonstrates that wood sourcing complies with its high standards through verification based on FSC® and PEFC™ certification systems (Figure 5). More than 99 percent5 of wood and dissolving wood pulp used by the Lenzing Group is either certified by FSC® or PEFC™ or inspected in line with these standards (Figure 6). This is either done by directly purchasing certified and controlled wood or by executing an internal Due Diligence system (DDS, see Box 1 on page 11) which is in accordance with these two standards.

Also, the additional CanopyStyle verification audit was renewed in 2019, and the final audit report, which was published in the second half of 2020, confirmed compliance with the CanopyStyle Guidance. All Lenzing Group production sites are FSC® CoC (chain of custody) certified.

PEFC™ is used for wood sourced from Central Europe, based on strict, rigorously enforced national forestry laws. FSC® certification of forests is not widespread in this region. Therefore, most wood sourced is procured with a PEFC™ certificate and receives FSC® Controlled Wood status at the corresponding Lenzing site after a due diligence process. The Lenzing site has held the PEFC™ Chain of Custody certification as its main certificate for more than a decade. This is complemented since 2016 by an FSC® Chain of Custody certificate that covers all Lenzing production sites. Therefore, all wood input to the Lenzing Group is either certified or controlled by the FSC® certification system (Figure 7).

Issue March 2021 - page 10 Due diligence System (DDS) for wood procurement Lenzing’s procured wood is 100 percent traceable to the forest of origin. Formal traceability systems ensure that the origin of all purchased timber is known. Lenzing’s approach and systems include also the company’s public commitment to sustainable sourcing and the traceability of fiber (see Wood Sourcing Policy). Regardless of whether the wood used comes from certified forests or not, Lenzing wants its stakeholders to be able to trust that it originates from sustainable sources. Therefore Lenzing uses its own Due Diligence Systems to check that 100 percent of the purchased wood has been harvested in compliance with national legislation and according to its Wood Sourcing Policy.

To increase credibility, Lenzing strives to verify these traceability systems by independent third party, such as FSC® and PEFC™ chain-of-custody, FSC® Controlled Wood and/or ISO 14001. The target of 100 percent coverage by third-party systems has been met every year since 2010. Information about achieved forest certification shares and third party verified traceability systems are published in Lenzing’s Sustainability Report, which is also independently verified by external auditors (KPMG). Lenzing therefore can state that its raw material comes from 100 percent sustainable sources.

All Lenzing Group production sites are FSC® CoC (chain of custody) certified (Table 2), i.e. that Lenzing is entitled to market fibers as FSC® certified.

Table 2: Forest Certification status of Lenzing Groups's production sites

Issue March 2021 - page 11 Figure 5: Certification status in the Lenzing Group 2020 Figure 6: Overall certified and controlled wood in the Lenzing Group

Figure 7: FSC® certified and controlled Wood in the Lenzing Group

Pulp suppliers can hold more than one forest related certificate. Most of the pulp suppliers located in North America do also carry the Sustainable Forest Initiative (SFI) certification which is also a national member of the global PEFC certification scheme and fully endorsed by them.

Issue March 2021 - page 12 What is Chain of custody? Lenzing’s Chain of Custody certifications enable Lenzing’s customers to have their products certified in turn. The chain of custody documents the flow of materials from the forest source through all supply chain stages right up to the final product.

What is a PEFC™ controlled source? PEFC™ controlled wood sources are sources that meet the minimum requirements accepted by PEFC™. These include implemented due diligence systems comprising risk assessments and on-site audits based on the PEFC™ standard. All Lenzing Group’s PEFC™ certified or controlled sources are also FSC® controlled by Lenzing’s due diligence process.

What is FSC® controlled wood? FSC® Controlled Wood sources are sources that meet FSC® requirements for sourcing FSC® Controlled Wood. These include implemented due diligence systems based on FSC® risk assessments on country level and, e.g., on-site audits based on the FSC® standard. Lenzing holds a FSC® Controlled Wood Certificate.

What is FSC® Mix? FSC® Mix is FSC® certified material which is mixed with FSC® controlled wood material according to the credit or percentage system. Lenzing Group uses the credit system.

Issue March 2021 - page 13 History of responsible wood and pulp sourcing in the Lenzing Group The Lenzing Group has been verifiably committed to the certification of its raw material sources for more than 25 years. Lenzing’s first internal wood procurement policy dates back to 1995. It has continuously been upgraded ahead of the trends ever since. In recent years, the policy has been aligned with the CanopyStyle Initiative (see below). As of 2016, all Lenzing Group sites are certified in accordance with the FSC® Chain of Custody standard.

Figure 8: 25 years of wood and pulp certification in the Lenzing Group

Issue March 2021 - page 14 Lenzing’s reliable partners: small-scale forest owners and strict European forestry laws Strict forestry laws and enforcement in Central Europe compel forest owners to engage in sustainable forest management. Since forestry operations in the region are generally small-scale, many small forest owners harvest wood for additional income and do not participate in a certification process. Experience shows that they typically operate for the long term with a very cautious harvesting behavior. This characteristic small-scale forestry structure requires the Lenzing Group to procure limited quantities of wood other than that certified to FSC® or PEFC™. Of course, Lenzing’s Wood and Pulp Policy forms part of all wood purchasing contracts. All wood suppliers, about 700 during the recent years, are assessed once a year by a scoring system utilizing FSC® Controlled Wood criteria. Figure 5 “Certification status” shows this proportion of wood as “FSC® Controlled Wood”.

Regional wood supply for Lenzing’s own pulp mills

As wood is by far the largest volume of materials purchased in the Lenzing Group, a separate procurement organization consisting of qualified, highly trained foresters has been established only for wood. The company has a track record of reliable long-term relationships with its wood suppliers. Lenzing’s Wood and Pulp Policy has been agreed upon by all suppliers in personal communication. Regular formal audits are conducted, but ongoing, day-to-day, informal, personal contact between Lenzing’s procurement team and suppliers is even more important. In case of severe findings regarding sustainability aspects, a contract with a supplier can be suspended or terminated.

The Lenzing Group operates two pulp factories in Europe with regional wood supply: The Lenzing site in Austria uses mainly beech wood plus small amounts of other hardwoods and spruce, whereas the Paskov plant in the Czech Republic utilizes spruce. A new pulp factory in Brazil is under construction, and will use local wood from the surrounding eucalyptus plantations.

Regional wood sourcing in Central Europe Lenzing is committed to the cascading use of wood. Both Lenzing’s European pulp sites largely make use of timber generated by thinning and of damaged wood from calamities, drought or storm that is unsuitable for high- value uses in the wood industry such as furniture, flooring or construction wood, and of saw mill residue. Dissolving pulp production even generates higher value in the supply chain as compared to paper or panel production or incineration and thus makes a valuable contribution to sustainable forest management.

Sustainability criteria have long been crucial for the selection of wood suppliers. About 700 suppliers, a large number of them private owners, have delivered wood to Lenzing’s two pulp factories in Europe in the recent years. The state forests of Austria, Germany, Czech Republic, and Slovakia are also important wood sources for Lenzing’s pulp sites and supply about 25 percent of the wood procured; these countries have strong political commitments to sustainable management of their forests. Strict European forest regulations and reliable enforcement of these regulations and laws ensure the sustainability of Lenzing’s supply partners.

Demand for fibers decreased sharply in the second and third quarter of 2020 due to the COVID-19 crisis. As a consequence, the Lenzing Group temporarily produced less own pulp and procured less wood. Many small deliveries from small suppliers who deliver only once a year were therefore not required, lowering the number of suppliers from about 700 in 2019 to about 400 in 2020. The suppliers who remained tended to supply larger volumes and have long-term delivery contracts.

Issue March 2021 - page 15 Adapting forest to climate change In Lenzing’s Central European wood-sourcing countries, the percentage of broadleaf forest, especially the domestic beech, is increasing6, as forests are being returned to a more natural tree species mix. According to its natural habitat, the area devoted to spruce cultivation is decreasing in Central Europe, although growing stocks are still increasing in all countries due to low felling rates. In some areas, rising average temperature also increases the growth rate of beech, though in other areas decreased rainfall counters this trend. These effects combined lead to a higher availability of beech wood. Utilization of beech wood as a material is limited due to its properties. Manufacturing fibers provides relatively high value creation as compared to wood use for energy generation. This transition is also crucial for adapting forest ecosystems in Central Europe to climate change through higher species diversity 7 8.

Regionality In order to ensure short transportation distances and short delivery times, almost all the wood required originates either from the country where the pulp is produced or from neighboring countries. This regional9 wood supply accounted for 98 percent of the supply for the Lenzing site from 2015 to 2017. Due to sourcing issues caused by updated FSC® risk assessments in some Central European countries, the regional supply rate temporarily decreased to 92.5 percent in 2018 and 91.5 percent in 2019. In 2020, it was 94.4 percent. For the Paskov site, the regional supply rate increased from 93 percent (2015-2017 average) to 99 percent in 2018 and 100 percent in 2019 and 2020, mainly due to direct supplies from the Czech Republic.

More than 90% of the wood supply for Lenzing’s own pulp mills are sourced in 4 countries, Austria, Germany, Czech Republic, and Slovakia.

Issue March 2021 - page 16 Figure 9 Wood sourcing for Lenzing Group’s own pulp mills in Lenzing, Austria, and Paskov, Czech Republic in 2018, 2019, and 2020. “Other countries“ for Lenzing site until 2018 were Estonia, France, Switzerland, Poland, Romania, Russia and Ukraine, and for 2020, Poland, France, and Switzerland

Wood from Belarus, Estonia, Poland, Romania, Russia, and Ukraine was exclusively sourced with FSC® certificates. In 2020, no wood was sourced in Belarus, Romania, Estonia, Russia and Ukraine. Wood supplies from Ukraine to the Paskov site ceased in 2016, from Belarus in 2018. For underlying figures, see Sustainability Report 2020, Annex tables.

Wood logistics Lenzing’s wood logistics system moves large quantities of material and is therefore highly optimized for cost reasons. Continuous improvement in this area also leads to minimized emissions from logistics by preferring train transports whenever possible. The share of wood delivered to the Lenzing site by train ranges from 75 to 80 percent. Train transport is mostly used for distances of more than 200 km; for shorter distances, road transport is often more feasible.

Issue March 2021 - page 17 Local wood supply in Brazil In preparation for the pulp factory construction, the LD Celulose joint venture secured FSC®-certified plantations10 covering over 44,000 hectares to provide the necessary biomass. Around 70,000 hectares of plantation will be managed once full production capacity is reached. These plantations operate completely in accordance with the guidelines and high standards of the Lenzing Group for sourcing wood and pulp. This underlines Lenzing’s commitment to leading wood and pulp certification schemes.

An essential aspect that compelled Lenzing to enter into a joint venture with Duratex in Brazil was its track record and reputation for environmentally responsible forest management, its tradition of respect for the environment, its experience in responsible and productive forest management, and its extensive knowledge of the Brazilian Forestry Code (of 2012), which is one of the most stringent in the world. Lenzing makes a point of only working with certified and controlled wood sources to ensure supply chain sustainability. This sustainability is being maintained at LD Celulose with Duratex’s forest management expertise.

Duratex has a long history of responsible forest management and shares this expertise in the joint venture. Duratex was the first company in the southern hemisphere to obtain FSC® certification in 1995, and in addition to LD's forestry unit, it is responsible for 200,000 hectares of forest. Of these 200,000 hectares, 56,000 are conservation areas, native vegetation where preservation and care are guaranteed by Duratex. The Duratex Forest Management Plan was adopted, which is responsible for ensuring compliance with Forest Stewardship Council (FSC®) certification criteria. The FSC® certificate provides the assurance that LD Celulose's forest management work takes account of aspects such as respect for the rights of indigenous people, the wellbeing of the professionals who work in the forest and local communities, the reduction of environmental impact, and the promotion of native forest conservation and restoration efforts.

The forest unit responsible for supplying LD Celulose’s wood is in Triângulo Mineiro in the State of Minas Gerais. The area that is being transformed into LD Celulose forest unit has been used for cattle raising, intensive agricultural activities like soybean and coffee, and eucalyptus forestry since the 1970s. No native (primary) forest will be converted. The plantations are more than 800 km from the region that comprises the Amazon rainforest.

Lenzing actively collaborates with Canopy to ensure that the wood sourcing is in line with sustainable practices. All these measures, together with the Due Diligence System (DDS) and the certification of the supply chain ensure that wood sourcing is in line with Lenzing’s Wood and Pulp policy and sustainable practices. Addressing the situation in Brazil, the measures are also set up to avoid using resources from the Amazon region.

Environmental Monitoring Program “Torre de Fluxo” To address major environmental impacts of its operations, LD Celulose has continued a program named “Torre de Fluxo” in its sphere of influence. Duratex has participated in this cooperative initiative since 2008, which is coordinated by the Forest Research and Studies Institute (IPEF), the French Agricultural Research Center (Cirad), and the Higher School of Agriculture "Luiz de Queiroz" at the University of São Paulo (Esalq/USP). The program works to periodically collect data on carbon, water, and nutrient flows from plantations. The intention is to gather more information for research on the best responsible management practices that combine productivity and sustainability. In 2019, Lenzing’s joint venture partner Duratex renewed its participation in the program for another seven years.

Issue March 2021 - page 18 Currently, and until the pulp mill is in operation, timber harvested from the plantation is sold to the market as logs for saw mills, chips for particle board, and biomass fuel for drying processes.

For details on environmental aspects of the project, see the parts on chapters: biodiversity, and water.

Pulp suppliers to the Lenzing Group from the global market

The main dissolving wood pulp production regions for the global market are Europe, North America, South America, China, and South Africa. Lenzing’s purchased dissolving wood pulp is mainly produced from eucalyptus but also comes from acacia, aspen, birch, maple, and southern pine. The actual tree species vary depending on the region. Lenzing ensures that the bleaching process of all purchased pulp is totally chlorine-free (TCF) or elemental chlorine-free (ECF).

Some market pulp mills supplying Lenzing rely on eucalyptus plantations as their main wood source. Plantations provide wood at very high yields per unit area and with a very high cellulose content. This substantially reduces the land use for wood-based cellulosic fibers compared to most natural fibers. When sustainably managed, plantations reduce deforestation pressure on natural (primary) forest areas. They also consider biodiversity aspects and water management. For details, see chapter Sustainability aspects in wood and pulp sourcing.

Lenzing currently11 utilizes dissolving wood pulp for its commercial fiber production from the following pulp suppliers:  Lenzing AG pulp mill/Lenzing Group (Austria)  Biocel Paskov pulp mill/Lenzing Group (Czech Republic)  Sappi Ltd. (South Africa, USA)  Södra (Sweden)  Rayonier Advanced Materials (USA)  GP Cellulose (USA) For updates and details on the pulp mill locations details, please see the website https://www.lenzing.com/sustainability/production/resources/wood-and-dissolving-wood-pulp

Table 3 Wood and dissolving wood pulp supply in the Lenzing Group . Dissolving wood pulp supply, from own production and dissolving wood pulp market (2016-2020).

Issue March 2021 - page 19 Stakeholder dialog

Within its strategic focus area “Partnering for systemic change”, Lenzing is strongly committed to numerous activities in different international multi-stakeholder dialogs.

CDP Forest “We are particularly proud to be the only The Lenzing Group contributed to Carbon Disclosure first-time discloser who has achieved an Project (CDP) in the areas of Climate and Forests for ‘A’ score for tackling climate change and the first time in 2020. It received a double “A” score acting to protect forests. The double ‘A’ for tackling climate change and acting to protect forests. Only 16 companies worldwide have an ‘A’ score reaffirms our long-term rating for forests. Through its significant sustainability strategy and is an exciting demonstrable actions in these areas, Lenzing has acknowledgement of our efforts in taken a leading position on corporate environmental ambition, action, and transparency. The CDP forest transparency and sustainable raw score confirms that the production of Lenzing’s wood- material sourcing”, says Stefan Doboczky, based cellulosic fibers avoid contributing to CEO of the Lenzing Group. “This deforestation, by combining a stringent wood sourcing policy, forest certification, and dedicated recognition will boost our visibility among commitment to the CanopyStyle initiative. a broad group of important stakeholders.”

Supporting forest conservation

In addition to activities related to its own supply chain, Lenzing supports conservation solutions in other regions outside the own sourcing areas, such as afforestation in Albania (see box on page 32/33).

Lenzing supported the ‘Earth Day Campaign’ 2019 and thereby the restoration of the Yosemite National Park in California, USA. With the support of this initiative, One Tree Planted was able to plant 115,000 trees in total across over 354 hectares (875 acres). On behalf of Lenzing 16,141 trees were rooted into the earth, which replaces some of the area destroyed during the California wildfires. Not only did this restore the land, but also positively impacted wildlife habitat and protected species. The area will serve as a community recreation area with no consumptive activities, hence further protecting and reducing the risk of land erosion problems, such as landslides, flooding and fire risks.

Lenzing also provided support towards political leaders for the protection of ancient and endangered forests in Canada (Broadback Forest Quebec, Vancouver Island) and Indonesia (Leuser Ecosystem).

Forest Europe and national forest strategies

The Forest Europe political process was initiated in 1990 by the Ministerial Conference on the Protection of Forests in Europe, which comprises 46 states, to promote sustainable forest management in Europe. A set of indicators grouped into six different criteria was developed to measure the sustainability performance of European forests and set targets for improvement12. Current efforts focus on climate change adaption13, water protection, and biodiversity14. As a major buyer of wood in Europe, the Lenzing Group supports these targets, which aim to ensure the continued and improved function of forests in their ecosystems while maintaining the long-term availability of wood as a raw material.

See also section “Sustainable forest management” for details.

Issue March 2021 - page 20 The European and Austrian bio economy strategy In the European bioeconomy strategy, the replacement of fossil raw materials is dependent largely on using wood and forest products as a major source of the required materials. As the European Forest Institute (EFI) report “Seeing the wood in the forest” 15 puts it: “The Green Deal needs wood”. On the basis of the European strategy, the Austrian bioeconomy strategy was published in 201916. The current phase calls for the developments of an action plan. Lenzing is represented in the bioeconomy platform and provided input on the strategy and the development of the action plan in 2019 and 2020 through workshops and an online consultation. The action plan aims to balance the need for mobilizing timber as a raw material for the bioeconomy with assuring and improving the vitality and resilience of forests through adequate forest management. The strategy is prominently placed in the government working program and its implementation is assured. One area of the action plan of particular relevance to Lenzing is the continued development of the biobased circular economy, where Lenzing will contribute accordingly.

Austrian Forest Strategy and Austrian Forest Dialog

The basis for the development of this strategy was the first Austrian Forest Program in 2007. The Austrian Forest Dialog is a policy development process involving 85 organizations, including forest owners, government and non-government organizations, as well as industry associations. Lenzing supports this activity through its membership in the industry association “Forst Holz Papier”. As a response to the work of Forest Europe (see chapter Sustainable Forest Management) to define criteria for sustainable forest management and to set targets for improvement, the Austrian Forest Dialog (Walddialog) set 7 thematic areas for this program. Progress was assessed in the report “Austria’s Forests 2017” and the update in 202017. The criteria and indicators were developed for Austria on the basis of the Pan-European Criteria and Indicators for Sustainable Forest Management (SFM) in order to monitor the progress in sustainable forest management . The Criteria describe various aspects of sustainable forest management and contain sets of indicators. For the indicators, targets are set and monitored.

Criteria and highlights in the report ”Austria's forests 2017”

Table 4: Criteria and highlights in the report " Austria's forests 2017"

Issue March 2021 - page 21 The Austrian Forest Strategy 2020+ is structured along these seven thematic areas and developed a vision, a strategy broken down into 49 targets, and addresses key challenges in the thematic fields. The vision confirms a sustainable forest management for multifunctional purpose of the forest, as a basis for the forest based economic sector, and providing added value for society.

CanopyStyle Initiative

Lenzing cooperates with Canadian NGO Canopy and maintains a continuous dialog with members of the CanopyStyle initiative to ensure responsible wood sourcing and protect the world’s ancient and endangered forests from ending up in textiles and fibers.

Canopy publishes the Hot Button Report, an annual ranking of all wood-based cellulosic fiber manufacturers based on their wood and pulp sourcing performance, transparency and innovation. In recent years, Lenzing has shown continuous improvement in all of these criteria: Lenzing’s Wood and Pulp Policy has been aligned with the CanopyStyle initiative for years, and in 2020, geographical locations of pulp suppliers have been publicly disclosed in more detail (see https://bit.ly/3tpvjqN ). Regarding alternative cellulose sources, Lenzing is the first company to produce and market lyocell fibers on a commercial scale using pre-consumer cotton scraps and post-consumer garments (for more information, please see chapter “REFIBRA™ technology”). Furthermore, Lenzing takes an active part in the Zero Discharge of Hazardous Chemicals (ZDHC) initiative and proactively advances track- and traceability of its fibers within the value chain.

In Canopy’s latest Hot Button Report18, published in November 2020, Lenzing received its first-ever dark green shirt and improved its score from 26.5 buttons in 2019 to 30.5 in 2020, continuing its long record of top rankings.

Strict Wood and Pulp Policy

No sourcing from controversial sources, including:

 ancient and endangered forests  high conservation value areas

All Lenzing production sites are FSC® certified Dissolving wood pulp worldwide uses less than 1 percent of globally harvested wood Lenzing’s dissolving pulp is made from beech, spruce, eucalyptus

WOOD Kplus competence center

Many Austrian companies, including Lenzing, and scientific bodies have joined forces in the “Kompetenzzentrum Holz”. It is a leading research institute in wood and wood-related renewable resources in Europe. Its core competences are materials research and process technology along the entire value chain – from raw materials to finished products. It develops methods and basic principles and performs applied research at the interface between industry and science.

A strategic dissertation supported by the Lenzing Group, finalized in 2020, aimed to achieve a deeper understanding of societal perceptions of sustainability in the global sourcing of wood. Sustainable forest management as a concept appears to be contested in the debate on environmental and social governance. The project systematically analyzes perceptions of this concept in scientific literature, in sustainability reports of large corporations, and in NGO communications. For more information, please see the resulting publications. 19,20,21,22.

Issue March 2021 - page 22 Greenhouse Gas Protocol process on carbon removals/land use The Greenhouse Gas Protocol has launched a process to develop new standards or guidance on how companies should account for the following activities in their greenhouse gas inventories: Carbon removal and sequestration, land use, land use change, bioenergy. One starting point for the initiative is the criticism of carbon neutrality for bioenergy and emissions from biogenic sources. In Lenzing’s view, sustainably managed forests and plantations are key elements for climate change mitigation through carbon sequestration in the forest, harvested wood products, and replacement of fossil-based materials that have high carbon footprints. Moreover, sustainably managed semi-natural forests are the most successful way to protect biodiversity and enable people to enjoy the benefits of forests in the form of recreation or micro- climate benefits (“ecosystem services”), for example.

The outcome of these ongoing considerations will have a decisive impact not only on the wood-based fiber industry but on the entire wood-based bioeconomy. Lenzing has signed up for the review group to comment when the technical working groups have drafted the first documents.

FSC® - Forest Stewardship Council®

Individual sites of the Lenzing Group have been FSC® chain of custody certified since 2007. The Group multi- site certification covering all sites was received in 2010. In 2017, the Lenzing Group joined FSC® as a member, contributed to the 2017 General Assembly, and is in touch with the initiative “Fashion and FSC® – from forest to consumer”. First brands are bringing garments with FSC® certificate to the market with Lenzing’s fibers now, for example,

Danish brand Masai, see: https://www.masai.co.uk/FSC_Pressrelease_Masai.html

PEFCTM- Program for the Endorsenment of Forest Certificates

The Lenzing Group was a founding member of PEFC™ Austria in the year 2000 and participates in working groups and projects. Lenzing relies mainly on PEFC™ certification for wood sourcing in Central Europe.

UNECE/FAO/PEFC™ Fashion for Forests Initiative In partnership with the UNECE and FAO, the Forests for Fashion initiative by PEFC™ is linking forest-based materials from sustainably managed forests with the world of fashion23.

In the Forests for Fashion exhibit at UN headquarters in July 2018, a capsule collection was shown by Spanish designer María Lafuente using the world’s first PEFC™-certified fabrics, produced by Textil Santanderina, from Lenzing™ fibers. A recent exhibition was shown at the Sustainable Fashion Week in Madrid 2020 https://www.pefc.org/news/pefc-promotes-forests-for-fashion-at-sustainable-fashion-week-in-madrid with fabrics by Santanderina containing Lenzing’s TENCEL™ fibers

Issue March 2021 - page 23 Are there alternative cellulose sources?

Lenzing is constantly verifying the ecological and economic suitability of alternative sources of raw material for cellulosic fibers. As not only wood, but all plants contain cellulose, annual plants and waste from food production are a potential source of cellulose for fibers. In addition, bacterial cellulose and recycled cellulose of various origin are considered as new raw material sources.

Recycled textiles are a particularly promising potential alternative cellulose source.

REFIBRA™ technology (Eco Cycle technology)

In a world average, every single consumer throws away more than 30 kg of clothes and shoes every year. About 85 percent end up in landfills. Investigations show clearly that most of it could be recycled. Therefore, Lenzing considers textile waste as a valuable raw material for cellulosic fibers.

Lenzing has developed a unique upcycling technology branded REFIBRA™. This technology utilizes pre- consumer cotton scraps and post-consumer garments from the textile value chain as raw materials. Along with wood pulp, these materials are used for the closed-loop production of lyocell fiber at a commercial scale. This creates high-quality fibers with the same properties as fibers from virgin wood pulp.

Lenzing launched the first commercial fiber with a chemically recycled content already in 2017. At time, this lyocell type fiber produced with REFIBRA™ technology contains the worldwide highest amount of recycled cotton of 30 percent.

Lenzing runs an active research and development project to further improve the utilization of post-consumer textile waste for the production of fully biobased and biodegradable fibers.

Issue March 2021 - page 24 Lenzing’s circular economy vision

We give waste a new life. Every day Lenzing drives the industry towards a fully-fledged circular economy by striving to give waste a new life in all aspects of our core business and by co-developing circular solutions with potential partners in and outside the current value chain to close loops wherever possible. This vision is based on our determination to create value with as little virgin resources as possible and reducing the use of fossil carbon in the company and the value chain while improving sustainability performance.

Three pillars of the vision

We use regenerative and recycled raw materials to protect the planet An important element in Lenzing’s circular economy vision is its use of wood, a renewable raw material wood harvested from sustainably managed forests. In its biorefineries, Lenzing converts 100 percent of the wood it receives to make high-value products and bioenergy. We are using an increasing amount of alternative cellulose feedstock, in particular from textile waste, as a raw material. Lenzing proactively participates in conservation projects to protect the world’s ecosystems.

We think circular to design out waste and pollution in all our processes In addition to using raw materials highly efficiently, Lenzing reduces its waste by closing loops in production. By implementing circular thinking and high environmental and social standards in Lenzing's operations, procurement and innovations, we minimize the impact on ecosystems and society not only for Lenzing, but also throughout the value chain. Lenzing proactively develops and drives innovations in recycling, such as our REFIBRA™ and Eco Cycle technologies, to deliver solutions to the issue of global textile waste.

We innovate processes to use and reuse materials again and again We continuously improve our biorefinery concept by optimizing the cascading use of biomass in order to minimize the utilization of virgin resources. We set standards in the industry by further closing the loops in the technologies we use.

We develop recycling technologies at a commercial scale to increase resource efficiency and reduce waste in the value chain. Lenzing implements close digital connections (blockchain technology) and relevant tools (e- branding services) to enhance transparency across the network to give customers and end users confidence and to facilitate the transition from a linear to a circular supply chain.

The pathway to achieve this vision is set as a sustainability target:

Issue March 2021 - page 25 Figure 10: REFIBRA™ technology (Eco Cycle technology) utilizes pre-consumer cotton scraps and post-consumer garments from the textile value chain as raw materials.

Eco Cycle technology VEOCEL™ fibers with Eco Cycle technology use the groundbreaking process of the REFIBRA™ technology for creating fibers for the nonwoven sector.

Other alternative cellulose sources

Any plant-based material can potentially serve as a source of cellulose and hence dissolving pulp for fiber- making. Lenzing has undertaken extensive research into many different alternative non-wood cellulose sources. Studies have been conducted on sources such as annual plants like hemp, straw, and bamboo. In general, annual plants have a higher growth rate per hectare than trees. Additionally, certain species have a higher cellulose content. Some of them are already available in large quantities, especially in the form of agricultural waste. This can produce an attractive cellulose yield per hectare; however, the advantages over wood, the traditional source of cellulose, need to be assessed case by case.

In its research, Lenzing identifies promising new cellulose sources and carefully considers their availability, technical feasibility, and economic scalability as well as the overall ecological impact with respect to Lenzing’s climate target and circularity approach.

Non-wood-based cellulose may be challenging to use for a number of reason. Dedicated research into the ecological and economic aspects for industrial-scale production is necessary:

 Availability Alternatives such as bamboo, straw, and various annual plants do not yet meet Lenzing’s needs in terms of availability in the required quality and amount. Many sources from annual plants are only available in the harvesting season and are difficult to store for year-round use.

Issue March 2021 - page 26 Annual plants are thus especially suitable for seasonal production campaigns. Despite specific benefits and high annual growth per hectare, the material is very bulky and more costly to transport. This favors obtaining the raw materials locally and keeping production capacities small.

 Environmental sustainability The conversion of forest to agricultural land for annual plants is a worldwide phenomenon that increases the pressure on all kinds of forests. Its drawbacks can be seen with oil palm production, for example. Sustainably managed forests store much more carbon per hectare than annual crops. Therefore, this trend adversely affects the CO2 balance of the entire value chain. The carbon balance must be thoroughly calculated while including all co-products from annual plants.

Important factors for the environmental impact of the process include energy consumption and use of process chemicals in pulp production. They depend heavily on the actual process and vary significantly from one annual plant to the next.

Dissolving pulp can be made with cotton linters, the viscose industry does in some regions. However, the pulping process uses substantial amounts of chemicals and energy. As most cotton linter pulp facilities are not state-of-the-art, resource use, emissions, and waste can be high for cotton linter pulp.

Another important factor in the sustainability performance of annual plants is the management of the agricultural areas. Highly productive sites need far more fertilizers and pesticides than forests, causing other environmental issues. For example, the overall environmental profile of large-scale bamboo plantations is known to be unsatisfactory.

 Technical feasibility Apart from not causing additional environmental issues, fibers produced with alternative feedstock must meet the same quality criteria as wood-based fibers. The biorefinery process for wood-based fibers is closely aligned with the raw material. This keeps quality and efficiency high and yields climate-neutral bioenergy as a co-product. With non-wood feedstocks, less bioenergy may be generated as a co-product, requiring additional energy sources for processing the feedstock into dissolving pulp, resulting in a potentially negative environmental impact.

Annual plants contain more mineral components and organic substances that have to be removed to produce high-quality dissolving pulp. This purification typically requires the use of aggressive chemicals and causes waste issues. It is a big challenge to develop new sustainable technologies for these materials while maintaining product quality and ecological friendliness. On the other hand, in woody plants like trees, these components are mainly concentrated in the bark, which is easily removed in the first stage of the process.

Paper industry experiences with these sources are of limited use since dissolving pulp has to meet very different quality and purity requirements. While modern breeding and harvesting concepts have been developed, a new biorefinery process for annual plants still has to be adapted to the special requirements, not to mention circulation management for process chemicals and treatment of impurities originating from the plants. So far, no established industrial process meets these prerequisites.

Based on current data, large-scale, sustainable, renewable production of cellulose is still best done using wood from sustainably managed forests instead of the aforementioned alternatives. At the same time, it is Lenzing’s aspiration as an innovation leader to overcome these challenges and find new solutions. The most promising approach has turned to be cotton upcycling. Lenzing came up with the first industrially implemented solution: REFIBRA™ technology, which uses a large amount of textile waste as feedstock and represents an important step towards achieving a circular economy.

Issue March 2021 - page 27 Sustainability aspects in wood and pulp sourcing

Sustainable forest management

Lenzing supports the concept of sustainable forestry as defined by the Ministerial Conference on the Protection of Forests in Europe and adopted by FAO:

“The stewardship and use of forests and forest lands in a way, and at a rate, that maintains their biodiversity, productivity, regeneration capacity, vitality, and their potential to fulfill, now and in the future, relevant ecological, economic, and social functions, at local, national, and global levels, and that does not cause damage to other ecosystems.”

To promote sustainable forest management in Europe, the Forest Europe political process was initiated in 1990 by the Ministerial Conference on the Protection of Forests in Europe, which includes 46 states. Criteria and indicators (C&I) have emerged as a powerful tool to promote sustainable forest management (SFM). Since the United Nations Conference on Environment and Development (UNECD) in Rio in 1992, several different international processes and initiatives have developed criteria and indicators as a policy instrument to evaluate and report progress towards sustainable forest management (SFM). FOREST EUROPE is the pan European policy process for the sustainable management of the continent's forests. It develops common strategies for its 46 participating countries and the European Union on how to protect and sustainably manage‐ forests. The Forest Europe process has developed a pan European C&I set, which consists of 6 criteria and 35 quantitative indicators (describing the forest status and changes) as well as 17 qualitative indicators (describing the national forest policies, institutions and instruments towards‐ SFM).

As a major buyer of wood in this region, Lenzing supports the Pan-European criteria for Sustainable Forest Management:

1. Maintenance and appropriate enhancement of forest resources and their contribution to global carbon cy•cles; 2. Maintenance of forest ecosystems’ health and vitality; 3. Maintenance and encouragement of productive func•tions of forests (wood and non-wood); 4. Maintenance, conservation and appropriate enhance•ment of biological diversity in forest ecosystems; 5. Maintenance, conservation and appropriate enhancement of protective functions in forest management (notably soil and water); and 6. Maintenance of other socio-economic functions and conditions.

Following from these criteria, a set of indicators for SFM has been created and is continuously developed. It serves to assess the status of European forests, set targets for improvement and track progress against the targets. For example, in Austria the multi-stakeholder organization “Walddialog” (Austrian Forest Dialog) manages the monitoring and reporting (see Austrian Forest Strategy and Austrian Forest Dialog).

Issue March 2021 - page 28 Forests are more than raw material for production Forests provide much more than just raw material for production. Apart from their beauty and recreational value, they fulfill a multitude of environmental functions and are essential for climate regulation. People benefit from ecosystem (goods and) services. Not all benefits to people from ecosystems can be measured in monetary terms. Therefore, it is important to include other values as well, such as health value, social value or conservation value. Sustainable management of forests ensures that the different ecoservices provided are maintained and protected together with the supply of material for the wood-based industry. This is the core of foresters’ job description and an important part of their training.

Figure 11 provides an overview of the functions of forest ecosystems associated with the provisioning of wood.

Figure 11: Functions of forest ecosystems, adapted from Lambini et al. 201924

The concept of ecosystem services is increasingly used to describe the links between the natural environment, e.g., forests, economic activities, and society.

Issue March 2021 - page 29 Biodiversity in sustainably managed forests and plantations Without biodiversity, there is no future for humanity. Biological diversity on our planet is made up of myriad interactions between different levels of life, such as genes, individual species, communities of creatures and entire ecosystems, such as forests or coral reefs. They have made Earth habitable for billions of years. The huge global biodiversity losses now becoming apparent represent a crisis equalling – or quite possibly surpassing – climate change.

Planting trees is one of the most appropriate and proven measures for limiting global warming. Utilization of forest products to replace fossil-based products with higher greenhouse gas emissions adds to this effect. Wood is also a core resource for the developing bioeconomy. On the other hand, greater utilization of wood resources can lead to unwanted negative effects on biodiversity.

Global biodiversity loss has recently moved into the focus of the sustainability debate in many industries, including the textile and nonwoven sector. The World Economic Forum identifies nature loss as one of the top three systemic risks to the economy, people, and planet. Numerous initiatives have been established to address this issue, while others have adopted workstreams dedicated to biodiversity. The Lenzing Group has joined the Advisory Group of Textile Exchange Biodiversity Benchmark.

Textile Exchange (TE) Biodiversity Benchmark ....has been launched on 2. December, 2020. The benchmark is part of the TE Corporate Fiber and Materials Benchmark (CFMB) Program and is connected to TE’s “Climate+” strategy. The role of the benchmark is to address biodiversity loss and support improvements through knowledge sharing. The methodology for companies to set targets for nature is being developed now through the Science Based Targets Network (SBTN). A first large action is a survey among companies on integration of biodiversity into business strategy and operations, making commitments, setting targets, and aligning with the Sustainable Development Goals (SDGs). a

For wood-based cellulose fibers, the main potential negative impact on biodiversity may arise from an intensified utilization of wood resources.

The Lenzing Group addresses this through one of two approaches, depending on the global region: Sustainable forest management is applied in the Northern hemisphere by Lenzing’s wood and pulp suppliers in Europe and North America. Plantation forestry is conducted mainly in the Southern hemisphere by Lenzing’s pulp supplier in South Africa and by the new in-house operations in Brazil.

Plantation forestry Plantation forestry can reduce deforestation pressure on natural (primary) forest areas by providing wood at very high yields per unit area as an alternative to sourcing it from natural forests. FSC® certification entails management criteria to protect biodiversity25, as determined in detail in the national standards. Management practices include a certain percentage of reserved conservation areas.

In South Africa, some 80 percent of the land set aside for plantation forestry is certified to FSC® standards. The focus is on two natural ecosystems: grasslands and wetlands. Both are included in conservation and regeneration programs run by plantation operators on their own and/or managed land. Approximately 25 percent of this land is not planted with trees but conserved for biodiversity. 26

Issue March 2021 - page 30 In the joint venture project with Duratex in Brazil, wood will be sourced from FSC®-certified plantations of over 44,000 hectares. The trees are mainly Eucalyptus species, with a small proportion of pine phasing out. A breeding and clone selections program is continuing to improve the yield and robustness of the trees. LD Celulose does not use genetically modified organisms (GMOs).

LD Celulose’s forests are in areas that were converted to agriculture many decades ago. There are generally large areas nearby for planting soy and coffee or grazing livestock.Some areas under LD Celulose’s management are destined for the Legal Reserve and Permanent Preservation Areas, as the law requires.The conservation unit closest to the LD Celulose planting area is Páu Furado State Park, which is about 30 kilometers from the plantation. That means this conservation unit is not impacted by LD Celulose's activities. The managed land contains a proportion of conservation area dedicated to biodiversity protection that goes beyond legal requirements and FSC® standards. The managed area belongs to the Cerrado biome and is located about 800 kilometers from the Amazon region.

LD Celulose is aware of the diversity of flora and fauna found in its forest areas, with 1,383 plant and 1,059 animal species registered since the 1970s when Duratex started its biodiversity research projects. Biodiversity research projects are undertaken in these areas through partnerships with universities27 in addition to internal programs. LD Celulose monitors fauna and flora in the forest areas and areas directly influenced by the mill site. These programs are carried out annually in the dry and in the rainy season and aim to monitor possible impacts on local biodiversity. The programs are also required by the Brazilian environmental agency. There have been no significant impacts on biodiversity to date.

Brazilian environmental law determines the maintenance of Permanent Preservation Areas (APPs) and Legal Reserve areas. APPs are specific areas of vegetation such as ciliary forests, areas of vegetation adjacent to water courses, and areas of vegetation on slopes. Legal Reserve areas correspond to the obligation to preserve at least 20 percent of a property in a rural area (Table 6). The APPs are very important to avoid, for example, the silting of rivers and the collapse of the slopes, while the Legal Reserve guarantees the preservation of native vegetation of the Brazilian biomes. To learn more about the main aspects of the Brazilian Forestry Code (Law No. 12.651 of 2012), including the challenges Brazil faces in applying this important law, there is a report from 2016 by Observatório do Código Florestal (OCF) avaible28.

LD Celulose's forestry unit is supervised by ecology and environmental specialists who were also responsible for identifying a High Conservation Value Area (HCVA) in Lenzing’s forests that contain Pseudopaludicola facureae, a species of frog found only in this region of Minas Gerais. The forestry unit constantly works to identify any area that needs to be classified as HCVA to ensure the protection of animal and plant species.

Table 6 gives an overview of land use in the area managed by LD Celulose. The productive area which is not currently certified is not yet planted with trees and is planned to be certified in due time.

Table 5 Quantitative description of areas managed and influenced by LD Celulose

Issue March 2021 - page 31 Biodiversity in European semi-natural forests

For semi-natural forests in Central Europe, forestry laws have long since prioritized biodiversity protection in forest management in order to balance the demand for wood sourcing with nature conservation. The study by Paillet et al.29, a comprehensive review of 49 papers (meta-analysis) on species richness comparing the differences between managed and unmanaged forests in Europe is probably the main authority on this issue. The main conclusion is “a small, marginally significant effect of forest management on total species richness. Species richness tended to be higher in unmanaged than in managed forests (+6.8 percent), but the response varied widely among taxonomic groups”. (page 108). In the region of Thuringia in Germany, the formal records on species richness go back 250 years30. There, biodiversity was shown to be higher in managed forests than unmanaged forests. For endangered species with special habitat requirements, protection measures other than non-management are required.

Another study describes the beneficial impacts of sustainable forest management on biodiversity in Northern Germany31. The report documents the high biodiversity in managed forests and shows that biodiversity has already improved as a result of Germany’s national strategy (established in 2007) for multi-functional forestry and towards more natural forest ecosystems.

Requirements for intensified biodiversity measures will likely come out of the European Union Biodiversity Strategy in development. In Austria, forest biodiversity is monitored according to a Biodiversity Index (Geburek et al. 201532) and will be regulated by the upcoming governmental biodiversity strategy from 2020 onwards. As a consequence, an increase in the share of protected and strictly protected areas is expected.

Afforestation and conservation project in Albania

Albania’s forest areas have some of the greatest need for improvement in Europe. New forest management approaches were recently implemented by the government to address environmental problems and fulfil the current needs of society with respect to the sustainable use of natural resources.

The Lenzing Group initiated a forest conservation project in Albania in 2018. It aims to support the development of rural areas in Albania in the broader region of Shkoder (Ana e Malit) and Diber (Peshkopi) by using natural resources sustainably and fostering alternative income sources for communities. The following three project pillars have been defined:

1. Afforestation of 20 ha degraded area in Ana e Malit 2. Modular pilot training in forest management for communities 3. Interdisciplinary vocational training in forestry

50 percent of Ana e Malit’s reported forest area is actually not covered by forest vegetation. Annual floods make life difficult for the population, most of whom earn their living from agriculture. Tree planting, taken together with erosion control measures, will help reduce annual floodings on the long-term.

Issue March 2021 - page 32 Cooperation with local community and NGOs

The project is co-financed by the Austrian Development Agency. It brings together Albanian and Austrian forest experts to increase forest management skills amongst communities, enables knowledge transfers between vocational schools and, last but not least, afforests 20 ha of degraded communal land in rural Albania. The project also actively integrates the local community, students at the forestry school in Shkodra, and employees of an Eco-Social Farm.

Modular pilot training in forest management for municipalities A local training center for forest management will develop modular training courses on forestry knowledge and specific issues such as safety and fire protection in collaboration with Austrian experts and Lenzing employees.

What was achieved until end of 2020:  To protect human health during COVID-19 pandemic, trainings courses were delayed and some meetings did not take place or have been adopted to comply with COVID-19-regulations  Digital map of area for clearer view of where the plantation takes place and where the erosion control measures are done. Can be used by Forestry School and Austrian school to demonstrate data collection from afforestation area and also in future as a model to scale up knowledge and information regarding digital mapping and zoning of areas.  Erosion control measures finalized  3,665 trees planted (1,875 Mediterranean pines, 500 oak, 990 hazelnut, 300 olive)  All training modules finalized: 4 forest management, 5 fire prevention and 4 safety in forestry work training courses were held (despite COVID-19 restrictions while observing social distancing regulations)  Promotional leaflet for forest school including future job profiles and career opportunities for graduates (based on job market analyses for forestry and wood processing sector in Albania)  Three groups of students at the Austrian school have continued working on the elaboration of their master thesis based on the concept idea of designing a tool to track the growth and failure rate of the seedlings in the afforestation area. Finalizations will be delayed due to COVID-19 restrictions.

Societal aspects of forestry Sustainability assessment represents a complex interplay of ethics and the social and natural sciences33. The developed countries predominantly focus on environmental issues (forest health, climate change, etc.) while the developing countries or “Global South” have a stronger emphasis on the socio-economic issues like the role of forest management in poverty alleviation34. This knowledge can, in the long run, provide a basis for more harmonized assessment criteria of the sustainability of wood sourcing for a global company like Lenzing.

Lenzing’s Wood and Pulp Policy35 refers to societal aspects, especially human rights, in wood sourcing covered by the wood certification systems used by Lenzing: FSC® and PEFC™. Together with national laws, they ensure that traditional, community, and civil rights are observed, and that labor conditions comply with or exceed ILO Core Conventions36. The underlying basis for ethical behavior in the Lenzing Group is laid down in Lenzing’s Business Code of Conduct and its Suppliers Code of Conduct, which outline the importance of compliant and sustainable business conduct.

Issue March 2021 - page 33 Forestry and climate change Forestry is an important area of action for climate protection. Every tree absorbs carbon dioxide from the atmosphere, converts it into organic polymers and stores it for the long term in living trees and forest soil.

Also in semi-natural forests in the Northern hemisphere, managed forests provide many services to society and at the same time produce wood for material and energy use. Several studies in Central Europe concluded that managed (semi-natural) forests have a greater positive impact on climate protection than natural forests without wood utilization37,38. The main contribution here, apart from carbon storage, is the better carbon balance of wood- based materials and energy compared to other natural sources, such as crude oil or coal, for the same products and services39.

The Intergovernmental Panel on Climate Change (IPCC) is the United Nations body for assessing the science related to climate change. The IPCC provides regular assessments of the scientific basis of climate change, its impacts and future risks, and options for adaptation and mitigation.

In its Fourth Assessment Report, the Intergovernmental Panel on Climate Change (IPCC) stated40,

“In the long term, a sustainable forest management strategy aimed at maintaining or increasing forest carbon stocks, while producing an annual sustained yield of timber, fiber or energy from the forest, will generate the largest sustained mitigation benefit. …. The combined effects of reduced deforestation and degradation, afforestation, forest management, agro-forestry, and bioenergy have the potential to increase from the present to 2030 and beyond.”

The recent IPCC report on Climate Change and Land41 states in chapter B. on adaptation and mitigation response options: B.5: “Sustainable land management, including sustainable forest management (5), can prevent and reduce land degradation, maintain land productivity, and sometimes reverse the adverse impacts of climate change on land degradation. It can also contribute to [climate change] mitigation and adaptation.” The new European Union’s Regulation on Land Use, Land Use Change and Forestry (LULUCF) (2018) contains a “no debit” commitment for land use. The amount of greenhouse gases emitted to the atmosphere must not exceed the amount of greenhouse gases removed from the atmosphere by the LULUCF sector. This means that the national governments are in charge of securing that forests remain carbon sinks or at least maintain their carbon stock. Therefore, the use of forest products from European Union forests is at least carbon and climate neutral.

Climate protection by use of forest products Accordingly, not only sustainably managed forests, but also forest-derived products such as buildings, furniture, or textile or nonwoven products made from wood-based cellulose fibers are important carbon reservoirs depending on their product lifetime. This makes a significant contribution to reducing the CO content of the atmosphere42,39. In addition, forest-derived products can replace other materials that have a higher climate- warming impact. ₂

Issue March 2021 - page 34 A recent study by P. Holmgren43 estimates the overall and positive climate effect of the European forests and the forest-based industry sector to be -806 milion tons of CO2 equivalents annually. This refers to about 20 percent of the European Union’s fossil emissions. The effect is the sum of a net sink in the forests and in harvested forest products, the fossil emissions of the forest sector value chain, and prevented fossil emissions through the substitution of fossil-based materials end energy. Substitution contributes nearly half of the overall benefits.

In the plantations of LD Celulose in Brazil, the carbon flows are monitored continuously in the environmental monitoring program “Torre de Fluxo” (see Box on page 18).

Wood and pulp sourcing is at the root of Lenzing’s business model. This part of the value chain harbors important climate change risks, on the one hand, as well as large mitigation opportunities through carbon removal and replacement of fossil-based materials, on the other.

Table 6: How forests and wood products affect climate change mitigation

In addition to CO2-abatement activities to reduce direct and supplier emissions, Lenzing will contribute to decarbonization of its customers by actively developing products that reduce their value chain emissions. For product innovation examples please refer to the “Net-benefit concept” chapter in the Sustainability Report 2020.

Climate change effects on forests and plantations In various assessments and special reports, IPCC noted that there is increasing evidence that climate change has various impacts on forests. As reviewed by the FAO, this also poses a potential threat to the delivery of wood and non-wood goods and environmental services44.

To sustain forest ecosystem functions and services amid changing climatic conditions, including climate variability and extremes, climate change is increasingly being considered in policies and approaches for sustainable forest management (SFM).

A study by Seidl et al.45 evaluated the climate change vulnerability of the current SFM strategy for commercial forests managed by Austrian Federal Forests. “Vulnerability” refers to the extent to which forests are susceptible to and unable to cope with adverse effects of climate change. The vulnerability assessment is a tool for evaluating potential climate change impacts and preparing forest managers to better understand and adapt to climate change.

The study findings showed that more than a quarter of the area studied would be highly vulnerable in the second half of the twenty-first century. Negative impacts particularly concern water-limited sites on calcareous bedrock, whereas forests in higher altitude will experience predominately positive effects of climate warming.

Issue March 2021 - page 35 Climate change models predict that extreme weather events like storms and extended droughts will occur more frequently. In the recent years, this already happened in Central Europe. Both storm damage and drought together increase the bark beetle problems for spruce forest, leading to large areas of destroyed forest and massive oversupply of low-grade timber from these calamities.

Forest Europe has recently issued policy recommendations on adaptation of forests to climate change13. They include measures in silviculture and practical forest management, technical capacities and infrastructure, genetics and forest reproductive material, monitoring, public awareness.

All global regions are affected by this general trend, thus risks of timber supply are expected to increase. To mitigate this and other climate-related risks, Lenzing has set up a working group to implement the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

Water and forestry

Water is a precious resource and its scarcity in many parts of the world is a threat. Natural and semi-natural forests are part of the natural hydrological cycle and, as such, do not consume water46. On the contrary, forests stabilize streamflow, thereby providing protection from floods and assuring water supplies in times of low rainfall. Forested catchments supply 75 percent of the used freshwater. Also, the more a catchment is forested, the lower the cost of water treatment47.

Regarding the wood from eucalyptus plantations, Lenzing recognizes that there is concern about the ground water use of eucalyptus plantations. Eucalyptus trees utilize water much more efficiently than other cultivated plants to build up biomass48.

In South Africa, numerous studies addressing water use at plantations are well documented, and further is limited by legislative restrictions49. Plantations in South Africa are only operated in regions with sufficient natural moisture to enable growth of the plants. The plantations for dissolving pulp wood need no artificial irrigation outside of the nurseries50.

For the plantations in Brazil of the Lenzing-Duratex Joint Venture, the Lenzing Group is aware that sustainable management of all environmental aspects including water is crucial for a long-term oriented business. Water issues with eucalyptus plantations are observed closely. The joint venture partner has previously in 2008 established a scientific review program Torre de Fluxo for long-term monitoring of carbon, water and nutrient flows in the eucalyptus plantations51. This is a cooperative initiative, coordinated by the Forest Research and Studies Institute (IPEF), the French Agricultural Research Center (Cirad) and the Higher School of Agriculture "Luiz de Queiroz" at the University of São Paulo (Esalq / USP), which works to periodically collect data on carbon, water and nutrient flows from planted forests. The intention is to gather more and more inputs for research on the best responsible management practices, combining productivity and sustainability. The continuous data gathering can help to determine productivity and carbon sequestration in relation to climate variables and to estimate the use and efficiency of water by trees. In 2018, Duratex renewed its participation in the program for another seven years. Duratex has also disclosed its water management and performance to CDP, and since 2016 always scored A- or B.

Issue March 2021 - page 36 Global forests and wood resources The total worldwide forest area amounted to 4.06 billion hectares in 2020, which is about 31 percent of the global land area. This area declined overall by 179 million hectares in the period 1990 – 202052, which compares to the twice the size of Venezuela. An estimated 420 million ha forest has been lost through deforestation in this time. Deforestation primarily occurred in tropical countries as a result of illegal logging. Forest areas in Europe (including Russia), and Asia actually expanded, by about 23 million ha and 38 million ha, respectively 52.

The demand in forest products is predicted to triple in the year 205042 in the context of a shift to a bioeconomy based on renewable resources instead of fossil fuels in which a large share of materials in the economy would be made of forest-based resources. To meet this demand in a responsible way, forests must be sustainably managed and used. The necessary expansion of forests will mainly be met by intensely managed plantations and needs to go hand in hand with mitigation of climate change.

The global wood market Wood is one of the most important renewable resources of our planet. Approximately 4 billion cubic meters of wood were harvested in 201853. Nearly half of the world’s wood harvest is used directly for energy. Industrial wood accounts for about 56 percent of the total use. Within the industrial wood, the major part goes to construction, panels, furniture and other materials shaped from wood. Around 19 percent of global wood is processed into pulp (paper pulp and dissolving wood pulp for fibers). The man-made cellulosic fiber industry delivering into textiles and nonwovens accounts for less than 1 percent of global wood use54. The estimate numbers include some uncertainties due to the available statistics, which give amounts in cubic meters or tons, and the conversion factors are not always easy to determine.

Figure 12: Global wood market 2018

Source: FAO database, CIRFS The fiber year and Lenzing estimates

Considering the available cellulose resources, dissolving wood pulp can be sourced in a sustainable way, and has a high potential for growth that is ecologically sustainable55. Future growth of the wood-based fiber industry can be sustained by growing forest resources in certain regions of the world, especially in Europe, North America and China56.

Issue March 2021 - page 37 How much wood does the Lenzing Group use? Assuming a dissolving wood pulp yield of about 40 percent, a rough estimate for the total annual wood input to produce approx. 1 million tons of fiber would be 2.5 million tons (dry matter) for both Lenzing’s own production and purchased dissolving wood pulp. The amount of wood required to produce dissolving wood pulp varies according to process conditions and wood species used by the Group’s suppliers.

Sustainable basis for wood Lenzing sourcing in Europe Following centuries of forest overexploitation, the silvicultural principle of sustainability was developed 300 years ago by German foresters to ensure an adequate supply of wood57. This means trees are only felled at the rate at which they can grow back. At present, European forests are growing steadily in size58. Strict forest laws are enforced in Central Europe, safeguarding sustainability. Note that these laws obviously apply to all forest owners in a country, unlike voluntary certification schemes which cover only the participants.

European forests play a key role in the stability of ecosystems. In addition to protecting soil from erosion, forests regulate the local climate and water supply, and sustain biodiversity. Moreover, they provide a service for society as recreational areas and a basis for tourism in many regions. All these functions can be provided in parallel to controlled wood extraction.

Approximately 42 percent of the land area of the EU-28 consists of forested land. The comparable figure for Austria is about 47 percent56. Lenzing sources wood mainly (more than 90%) from four countries: Austria, Germany, Czech Republic, and Slovakia. In these countries – as in all European countries – the forest area has steadily increased in the recent decades (Table 6 Table 7: Selected forest indicators for the four main sourcing countries of Lenzing's pulp mills in Europe

), while growing stock even increased by 28% (Figure 7) due to harvest lower than the growth. Timber harvesting in these countries accounts for approx. 65-70 percent of the annual net growth (net annual increment), which equals two-thirds of the sustainably available potential.

Growing stock in the four main sourcing countries of Lenzing's pulp mills in Europe (million m3)

Figure 13: Growing stock in the four main sourcing countries of Lenzing's pulp mills in Europe (million m3)

Issue March 2021 - page 38 Selected forest indicators for the four main sourcing countries of Lenzing's pulp mills in Europe

Country Austria Germany Czech Slovakia Source Republic

47 % 32 % 34 % 39 % FAO- FRA 2020 : According to national Share of forest area (%) statistics, Austrian has 48%.

Forest area @2020 (1000 3899 11419 2677 1926 FAO-FRA 2020 ha)

Forest area increase 2.5 % 1.4 % 1.1 % 1.0 % Schwarzbauer&Wittmann 2016 / FAO- FRA 2015 (1990-2015) (%)

PEFC Global statistics; Slovakia: FRA Certified forest area 80 % 78 % 69 % 67 % 2020 PEFC™+FSC® (%, 2019)

Forest Europe 2015 Forest area with some kind ca. 25 % ca. 67 % ca. 25 % ca. 40 % of special protection

Table 7: Selected forest indicators for the four main sourcing countries of Lenzing's pulp mills in Europe

Technology of pulp production: the biorefinery concept The Lenzing biorefinery concept is at the heart of Lenzing’s business model and one of the key features how Lenzing embeds circular economy principles. Lenzing uses the well-established and optimized magnesium- bisulfite process with a totally chlorine free bleaching sequence and a recovery of the process chemicals at both production sites at Lenzing and Paskov. For more information, see the Lenzing Sustainability Report 2019, chapter Circular Economy.

The Lenzing biorefinery concept ensures that 100 percent of wood constituents are used to produce fibers, biobased chemicals, and bioenergy, thus maximizing value creation from an economic and environmental perspective (Figure 9) Lenzing has been investing in the biorefinery concept for decades, making the company a forerunner in the production of biorefinery products at an industrial scale.

Highly efficient use of the raw material wood at the Lenzing Group’s biorefineries

Figure 14 Highly efficient use of the raw material wood at the Lenzing Group’s biorefineries – example Lenzing Austria site. Wood and biorefinery products calculated as „absolute dry”, and pulp as “air-dry”. The bioenergy produced supplies fiber production (in Lenzing, Austria) or the public power grid (in Paskov, Czech Republic) .The Paskov mill produces lignosulfonate as co-product.

Issue March 2021 - page 39 The key principles of Lenzing’s biorefinery concept are cascading wood use and circular economy:

 Use wood and its constituents as substitutes for oil-based products (recarbonization)  Use wood constituents multiple times along the value chain  Produce biobased chemicals, such as acetic acid, furfural and xylose59, to help increase the total material yield and value generated from wood  Recover and reuse process chemicals – this is a key contributor to sustainable success and profitability  Create useful products that are recyclable and therefore bind CO2 as long as possible

Table 8 Pulp production in the Lenzing Group

For more information on Lenzing’s biorefineries, see the Focus Paper “Responsible Production”.

Responsible pulp bleaching Bleaching is necessary to yield a dissolving pulp quality suitable for wood-based cellulosic fibers, such as viscose, modal, and lyocell. Lenzing’s two biorefineries produce pulp without using chlorine, but with oxygen- based substances (totally chlorine-free – TCF). Due to the elimination of chlorine, dissolving wood pulp produced in the Lenzing Group not only has less impact on the environment and human health but also ensures the high quality required for fiber production.

The bleaching process of all purchased pulp is at least elemental chlorine-free (ECF). Both these technologies satisfy the “best available technology” standards of the European Union60.

For more details on Lenzing’s production processes, see the Responsible Production focus paper.

New dissolving pulp mill in Brazil The new production facility was designed with sustainability in mind. It will be among the most productive and energy-efficient facilities in the world, meet the European Union’s Best Available Technology (BAT) standard60, and export more than 50 percent excess bioelectricity generated on-site as renewable energy into the public grid. The produced pulp can be 100 percent FSC® certified and will be totally chlorine-free (TCF). This site is planned to start up in the first half of 2022.

Issue March 2021 - page 40 Annex

Glossary

Please note that this small glossary does not claim to be scientifically comprehensive. The definitions are provided as a service to our readers and should support them to better understand the complex issues of forest conservation and forest use. In the current dynamic global discourse, methodologies are developing and definitions may sometimes be controversial.

Ancient and endangered forests Term originates from the NGO Canopy that defines it as intact forest landscape mosaics, naturally rare forest types, forest types that have been made rare due to human activity, and/or other forests that are ecologically critical for the maintenance of biological diversity and ecological integrity. https://canopyplanet.org/wp- content/uploads/2018/11/CanopyQuickGuideAncientEndangeredForests.pdf Biodiversity This is the variability among living organisms from all sources including, among others, terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are part. This includes diversity within species, between species and of ecosystems. Bioenergy Bioenergy is energy derived from biomass. The term refers to various forms of energy, including heat and electricity. Also the biomass that contains this energy can be referred to as bioenergy. The main sources of bioenergy are renewable resources. Biorefinery A biorefinery is a facility for sustainable processing of biomass into a spectrum of marketable biobased biorefinery products and bioenergy. Canopy Planet Society The Canopy Planet Society is a Canadian nonprofit organization that focuses on the conservation and protection of ancient and endangered forests. CDP The Carbon Disclosure Project (CDP) is a non-profit organization with the aim that companies and also municipalities disclose their environmental data, such as climate-damaging greenhouse gas emissions and water consumption. Once a year, the data on behalf of investors using standardized questionnaires. Questionnaires on a voluntary basis to collect data and information on CO2 emissions, climate risks and reduction targets and strategies of companies. www.cdp.net Cellulose The raw material for pulp production. Cellulose is a component of all plants. The cellulose content of wood is about 40 percent. EcoVadis EcoVadis aims to promote the environmental and social practices of companies through CSR performance monitoring within the supply chain and to support companies in improving sustainability. EcoVadis operates the first collaborative platform to deliver CSR ratings from suppliers to global supply chains. FAO – Food and Agricultural Organization of the United Nations The Food and Agriculture Organization of the United Nations (FAO) is a specialised agency of the United Nations that leads international efforts to defeat hunger. It is based in Rome. It is also in charge of UN activities related to forests.

Issue March 2021 - page 41 FSC® The Forest Stewardship Council® (FSC) is an international non-profit organization for wood certification. Growing stock Volume over bark of all living trees more than (e.g. 10) cm in diameter at breast height. International Labour Organization (ILO) The International Labour Organization (ILO) is a United Nations agency that sets international labour standards and promotes social protection and work opportunities for all. The ILO has 187 member states: 186 of the 193 UN member states plus the Cook Islands are members of the ILO. PEFC™ The Program for the Endorsement of Forest Certification Schemes™ (PEFC) is an international non-profit organization for wood certification. Plantation Forests of single species, monocultures that have been planted or seeded by human intervention and that are under intensive stand management, fast growing, short rotation. Examples: poplar, acacia or eucalyptus plantations. Primary forest Forests composed of native species in which there are no clearly visible indications of human activities and the ecological processes have not been significantly disturbed”. (FAO 2020 FRA Key findings, and FAO FRA Terms & Definitions p. 14). Includes both pristine and managed forests which meet the definition. Semi-natural forest Forests of endemic (native) species, established either through assisted or natural regeneration, or a mix of these under intensive stand management (includes forests in which assisted regeneration carried out with same species and similar species composition as in the natural forests in the area). Examples: many production forests in Europe, some teak plantations. sCore TEN The name of the Lenzing Group’s corporate strategy stands for a steady focus on performance (scoring) and the strengthening of the core business (core) as well as for long-term growth with specialty fibers like TENCEL™ and VEOCEL™. SFI Sustainable Forestry initiative, a forest certification scheme in mainly North America Woody plants Plants with a hard stem surviving winter above ground like trees and shrubs. Annual plants Herbaceous plants that die back above the ground during winter like hemp or straw. Paper pulp Chemically digested plant material used for the production of all grades of paper, containing a high amount of different wood constituents. Dissolving pulp Chemically digested plant material used for the production of viscose or lyocell fibers or chemically modified cellulosic products, containing a very high cellulose content – about 89 to 97% - with low other impurities.

Issue March 2021 - page 42 Index of figures Figure 1: Lenzing’s sustainability strategy “Naturally positive” and UN Sustainable Development Goals ...... 5 Figure 2: The cellulose cycle ...... 6 Figure 3: The principle of photosynthesis ...... 6 Figure 4: Sourcing of wood and dissolving wood pulp – the value chain...... 8 Figure 5: Certification status in the Lenzing Group 2020 ...... 12 Figure 6: Overall certified and controlled Wood in the Lenzing Group ...... 12 Figure 7: FSC® certified and controlled Wood in the Lenzing Group ...... 12 Figure 8: 25 years of wood and pulp certification in the Lenzing Group ...... 14 Figure 9 Wood sourcing for Lenzing Group’s own pulp mills in Lenzing, Austria, and Paskov, Czech Republic in 2018, 2019, and 2020. “Other countries“ for Lenzing site until 2018 were Estonia, France, Switzerland, Poland, Romania, Russia and Ukraine, and for 2020, Poland, France, and Switzerland ...... 17 Figure 10: REFIBRA™ technology (Eco Cycle technology) utilizes pre-consumer cotton scraps and post- consumer garments from the textile value chain as raw materials...... 26 Figure 11: Functions of forest ecosystems, adapted from Lambini et al. 2019 ...... 29 Figure 12: Global wood market 2018 ...... 37 Figure 13: Growing stock in the four main sourcing countries of Lenzing's pulp mills in Europe (million m3).... 38 Figure 14 Highly efficient use of the raw material wood at the Lenzing Group’s biorefineries ...... 39

Index of tables

Table 1: Sustainability targets regarding strategic focus area "Raw material security" ...... 6 Table 2: Forest Certification status of Lenzing Groups's production sites ...... 11 Table 4 Wood and dissolving wood pulp supply in the Lenzing Group . Dissolving wood pulp supply, from own production and dissolving wood pulp market (2016-2020)...... 19 Table 5: Criteria and highlights in the report " Austria's forests 2017" ...... 21 Table 6 Quantitative description of areas managed and influenced by LD Celulose ...... 31 Table 7: How forests and wood products affect climate change mitigation ...... 35 Table 8: Selected forest indicators for the four main sourcing countries of Lenzing's pulp mills in Europe ...... 39 Table 9 Pulp production in the Lenzing Group ...... 40

Issue March 2021 - page 43 References and Endnotes

1 Carle, J., and Holmgren, P. (2003). Working paper 79. Definitions Related to Planted Forests. In: Food and Agriculture Organization of the United Nations (2003). Forest Resources Assessment Program Working paper series. Available at: http://www.fao.org/forestry/25853-0d4f50dd8626f4bd6248009fc68f892fb.pdf [Accessed 15 February 2021] 2 Licence code FSC® (FSC-C041246); PEFC™ (PEFC/06-33-92)

3 https://www.lenzing.com/fileadmin/content/PDF/08_Corporate_Governance/Richtlinien_und_Kodizes/EN/Wood _Pulp_Policy_EN.pdf 4 International Labour Organization (ILO) 5 Non-certified wood was used for R&D purposes and was submitted to a due-diligence process according to Lenzing’s Wood and Pulp Policy. 6 Schwarzbauer, P., and Wittmann, F. (2018). Basic Indicators for the Sustainability of European Forestry. In: Lenzinger Berichte 94 (2018), 1-13. Available at: www.lenzinger-berichte.com [Accessed 21 January 2019] 7 Niedermair, M., Lexer, M. J., Plattner, G., Formayer, H. and Seidl, R. (2007). Österreichische Bundesforste AG. Klimawandel und Artenvielfalt. Wie klimafit sind Österreichs Wälder, Flüsse und Alpenlandschaften? Available at: https://www.bundesforste.at/fileadmin/publikationen/studien/Klimastudie_WWF.pdf [Accessed 21 January 2019] 8 FOREST EUROPE 2020. Adaptation to Climate Change in Sustainable Forest Management in Europe,Liaison Unit Bratislava, Zvolen, 2020 9 Regional wood supply originates from the country where the pulp mill is situated and from neighboring countries from which wood can be transported directly without crossing a third country. 10 FSC license code: FSC-C006042 11 as of 2020 12 Madrid Ministerial Declaration. 25 years together promoting Sustainable Forest Management in Europe, 7th Forest Europe Ministerial Conference, Madrid 2015. Available at: https://foresteurope.org/wp- content/uploads/2016/11/III.-ELM_7MC_2_2015_MinisterialDeclaration_adopted-2.pdf [Accessed 21 January 2019] 13 FOREST EUROPE 2020. Adaptation to Climate Change in Sustainable Forest Management in Europe, Liaison Unit Bratislava, Zvolen, 2020 14 https://forestbiodiversity.eu/ 15 Hetemäki, L., Palhani, M., Nasi, R., Seeing the wood in the forests. Knowledge to Action series , 01, European Forest Institute (EFI), 2020 16https://www.bmk.gv.at/themen/innovation/publikationen/energieumwelttechnologie/biooekonomiestrategie.ht ml 17 Walddialog 2017, 2020: ÖWAD – Indikatoren-Set für nachhaltige Waldbewirtschaftung. edited by S. Linser. Österreichischer Walddialog, 2017 and update 2020 18 The Hot Button Report 2020. Detailed Matrix of Viscose Producer Performance Available at: https://hotbutton.canopyplanet.org/ [Accessed 14. December, 2020] 19 Šimunović, N., Stern, T. and Hesser, F. (2018). Frame Analysis of ENGO Conceptualization of Sustainable Forest Management. Environmental Justice and Neoliberalism at the Core of Sustainability. In: Sustainability 10 (3165) 20 Schober, A., Šimunović, N., Darabant, A. and Stern, T. (2018). Identifying sustainable forest management research narratives: a text mining approach. In: Journal of Sustainable Forestry 37 (6), p. 537-554

Issue March 2021 - page 44 21 Sutterlüty, A., Šimunović, N., Hesser, F., Stern, T., Schober, A. and Schuster K. C. (2018). Influence of the geographical scope on the research foci of sustainable forest management: Insights from a content analysis. In: Forest Policy and Economics 90, p. 142-150 22 Šimunović, N., Stern, T. and Hesser, F. (2019). Is sustainable forest management enough? Insights from a frame analysis of European environmental non-governmental organizations. In: Austrian Journal of Forest Sciences 136 (2), p. 87–140 23 https://www.pefc.org/projects/markets/forests-for-fashion-initiative http://www.unece.org/info/media/news/forestry-and-timber/2019/forests-for-fashion-initiative-sets-new- trends/doc.html 24 Lambini C. K., Nguyen T. T., Abildtrup J., Pham Van D., Tenhunen J., Garcia S. (2018). Are Ecosystem Services Complementary or Competitive? An Econometric Analysis of Cost Functions of Private Forests in Vietnam. In: Ecological Economics, Vol. 147, pp. 343-352 25 FSC Global Development GmbH (2014). FSC® and Plantations. FSC’s position on plantations. Available at: https://ic.fsc.org/en/news-updates/id/1351 [Accessed 21 January 2019] 26 Manufacturers association of South Africa, PAMSA (2016). Celebrating trees, wood and water this Arbor Week. Available at: https://www.thepaperstory.co.za/celebratingtrees-wood-and-water-this-arbor-week-4-10- september/ [Accessed 2019.03.07] Sappi Southern Africa. Forest and Wetlands. Available at: https://cdn-s3.sappi.com/s3fs-public/Sappi-FAQs- Forests-and-wetlands.pdf [Accessed 2019.03.07] 27 Duratex Annual Report 2018. Available at: https://www.duratex.com.br/Relatorio-Anual-2018/en/index.html [Accessed 21 January 2019] 28 Brazil’s Forest Code. Assessment 2012-2016. IPAM Amazonia – Amazon Environmental Research Institute. https://ipam.org.br/wp-content/uploads/2017/01/relat%C3%B3rio_en_ocf_web.pdf 29 Paillet et al. 2010: Paillet Y., Bergès L., Hjältén J., Odor P., Avon C., Bernhardt-Römermann M., Bijlsma R.J., De Bruyn L,. Fuhr M., Grandin U., Kanka R., Lundin L., Luque S., Magura T.,Matesanz S., Mészáros I., Sebastià M.T., Schmidt W., Standovár T., Tóthmérész B., Uotila A., Valladares F., Vellak K., Virtanen R.,(2010) Biodiversity differences between managed and unmanaged forests: meta-analysis of species richness in Europe. Conservation Biology 24, 101-112 30 Schulze and Ammer, 2015: Schulze, E.-D. and Ammer, C., Spannungsfeld Forstwirtschaft und Naturschutz. (Conflicts between forest management and nature conservation). Biologie in unserer Zeit, 45: 304–314. (2015) 31 Ministeries of Agriculture Brandenburg and Mecklenburg-Vorpommern 2010: Biologische Vielfalt in den Wäldern Nordostdeutschlands. Edited by: Ministerium für Infrastruktur und Landwirtschaft Brandenburg and Ministerium für Landwirtschaft, Umwelt und Verbraucherschutz Mecklenburg-Vorpommern. Potsdam and Schwerin, 2010 32 Geburek, T., Büchsenmeister, R., Englisch, M., Frank, G., Hauk, E., Konrad, H., Liebmann, S., Neumann, M., Starlinger, F. and Steiner, H. (2015). Biodiversitätsindex Wald – Einer für alle! In: Biodiversität im Wald. BFW Praxisinformation 37, pp. 6-8 33 A strategic dissertation in the Competence Center Klpus WOOD supported by the Lenzing Group aims to achieve a deeper understanding of the perception in society about sustainability in the global sourcing of wood.

34 Sutterlüty, A., Šimunović, N., Hesser, F., Stern, T., Schober, A. and Schuster K. C. (2018). Influence of the geographical scope on the research foci of sustainable forest management: Insights from a content analysis. In: Forest Policy and Economics 90, pp. 142-150 35 http://www.lenzing.com/en/responsibility/ecological-responsibility/wood-and-pulp-policy.html 36 International Labour Organization (ILO) 2010: https://www.ilo.org/asia/decentwork/dwcp/WCMS_143046/lang--en/index.htm

37 Taverna, R., Hofer, P., Werner, F., Kaufmann, E. and Thürig, E. (2007). CO2-Effekte der Schweizer Wald- und Holzwirtschaft. Szenarien zukünftiger Beiträge zum Klimaschutz. In: Umwelt Wissen 0739, pp. 1-104 38 Braun, M., Fritz, D., Weiss, P., Braschel, N., Buchsenmeister, R., Freudenschus, A., Gschwantner, T., Jandl, R., Ledermann, T., Neumann, M., Polz, W., Schadauer, K., Schmid, C., Schwarzbauer, P. and Stern, T.

Issue March 2021 - page 45 (2016). A holistic assessment of greenhouse gas dynamics from forests to the effects of wood products use in Austria. In: Carbon Management 2016, pp. 271-283 39 Food and Agriculture Organization of the United Nations (2016). Forestry for a low-carbon future Integrating forests and wood products in climate change strategies. FAO forestry paper 177. Available at: http://www.fao.org/3/a-i5857e.pdf [Accessed 21 January 2019] 40 IPCC 2007: IPCC Fourth Assessment Report: Climate Change 2007. Working Group III: Mitigation of Climate Change. Executive Summary. http://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch9s9-es.html 41 IPCC, 2019: IPCC Special Report on Climate Change, Desertification, Land Degradation, Sustainable Land Management, Food Security, and Greenhouse gas fluxes in Terrestrial Ecosystems Summary for Policymakers Approved draft. 2019. 42 World Business Council for Sustainable Development (2010). Vision 2050. The new agenda for business. Available at: https://www.wbcsd.org/Overview/About-us/Vision2050/Resources/Vision-2050-The-new-agenda- for-business [Accessed 21 January 2019] 43 P. Holmgren, FutureVistas AB. Climate effects of the forest-based sector in the European Union. 2020. https://eustafor.eu/uploads/Study_Climate-effects-of-the-forest-based-sector-in-the-European-Union.pdf 44 Food and Agriculture Organization of the United Nations (2019). Climate change vulnerability assessment of forests and forest-dependent people. A framework methodology Available at: www.fao.org/3/ca7064en/CA7064EN.pdf [Accessed 21 January 2019] 45 Seidl. R., Rammer, W. and Lexer, M.J. (2011). Climate change vulnerability of sustainable forest management in the Eastern Alps. In: Climate Change 106, pp. 225-254 46 Sutterlüty, A., Hesser, F., Schwarzbauer, P., Schuster, K. C., Windsperger, A., and Stern, T. (2017). A Delphi Approach to Understanding Varying Expert Viewpoints in Sustainability Communication - The Case of Water Footprints of Bio-Based Fiber Resources. In: Journal of Industrial Ecology 21, pp. 412-422 47 World Business Council for Sustainable Development Forest solutions group (2014). Forests are key to global sustainability. Available at: http://docs.wbcsd.org/2015/10/FOREST-INFOGRAPHIC.pdf [Accessed 21 January 2019] 48 Davidson J. (1993). Ecological aspects of eucalyptus plantations. In: White, K., Ball, J. and Kashio, M. (Ed.). Proceedings, Regional expert consultation on Eucalyptus, Bangkok 1993. Available at: http://www.fao.org/3/ac777e/ac777e06.htm [Accessed 21 January 2019] 49 Albaugh, J. M., Dye, P. J. and King, J. S. (2013). Eucalyptus and Water Use in South Africa. In: International Journal of Forestry Research 2013 50 Sappi Southern Africa (2016). Sustainability FAQs. Available at: https://cdn-s3.sappi.com/s3fs-public/Sappi- FAQs-Water-and-Sappi%27s-plantations.pdf [Accessed 21 January 2019] 51 Duratex Annual Report 2018, p. 41 52 FAO 2020: Global Forest Resources Assessment 2020 – Key findings. Rome. https://doi.org/10.4060/ca8753en 53 FAO database: Food and Agriculture Organization of the United Nations database. Available at: www.fao.org/faostat/en/#home [Accessed 21 January 2019]

54 FAO database: Food and Agriculture Organization of the United Nations database. Available at: www.fao.org/faostat/en/#home [Accessed 21 January 2019] 55 Piotrowski, S., Carus, M. and Essel, R. (2016). Sustainable biomass supply and demand: a scenario analysis. In: Open Agriculture 1, pp. 18-28 56 FAO 2020: Global Forest Resources Assessment 2020 57 Von Carlowitz, H. C. (1713). Sylvicultura Oeconomica oder haußwirthliche Nachricht und Naturmäßige Anweisung zur Wilden Baum-Zucht

Issue March 2021 - page 46 58 Mather & Needle 1998: A.S. Mather and C.L. Needle (1998), The forest transition: a theoretical basis. Area 30.2, 117-124 https://rgs-ibg.onlinelibrary.wiley.com/doi/abs/10.1111/j.1475-4762.1998.tb00055.x 59 Purified/marketed by partner company

60 Suhr, M., Klein, G., Kourti, I., Gonzalo Rodrigo, M., Giner Santonja, G., Roudier, S., and Delgado Sancho, L. (2015). Best Available Techniques (BAT) Reference Document for the Production of Pulp, Paper and Board. In: P. O. o. t. E. Union (Ed.), EUR – Scientific and Technical Research series. Luxembourg: European Commission, EUR 27235 EN – Joint Research Centre – Institute for Prospective Technological Studies.

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