Corporate Responsibility Strategy and Status 2007 Evonik’s understanding of corporate responsibility | We define corporate responsibility as how we conduct our business and how we live up to our values. The overriding principles are reliability and credibility. Because: Evonik lives up to its promises. By integrating corporate responsibility into our business activities and creating innovative solutions, we make a contribution to sustainable development. Evonik demonstrates fairness and responsibility towards its employees, customers, owners, investors, suppliers, politicians, local communities and the general public. Evonik lives up to its promises.

1 Foreword

2 Who is Evonik?

Strategy—Where Evonik wants to be

5 Responding to future needs

6 Background to Evonik’s CR strategy

8 Evonik’s CR strategy

Status—Where Evonik stands today

11 Contribution to the business

16 Focus on employees

20 Best-in-class processes

25 Credits Dr. Werner Müller Chairman of the Executive Board

Ladies and gentlemen:

Evonik’s Executive Board has defi ned Because that’s what others do? Evonik In 2008 we did a good deal of ground­ clear goals for Evonik. These are: growth is in good company: Many other inter­ work to show how important this issue and value creation. We aim to be one of national companies highlight their com­ is to us. We developed a Corporate the most creative industrial groups in the mitment to responsible and sustainable Responsibility strategy as an integral part world, make a mark with our brand and business practices. Yet our ambitions of our corporate strategy. Our CR strategy instill it with life. go a good deal further. shows that we support economic mega­ Evonik’s commercial success is clear. trends, respond to ecological and social As planned we have now made our Because that’s what others expect us challenges and foster the development of entrance on the capital markets. Gaining to do? Corporate responsibility already new business activities. It is closely aligned CVC Capital Partners as an investor was a occupies a key position in the business to our core business and builds on our key step in the evolution of the company. community and investors and analysts are corporate values and core competencies. Now we are taking the next step: We are increasingly using corporate responsibility I am confident that corporate respon­ preparing to float Evonik on the capital reports as a basis for their assessment sibility will give us additional strength to market in three to five years time. of companies. Customers specifi cally ask address new challenges and give us a I am therefore proud to say that Evonik about our responsible management place at the forefront of people’s hearts can look forward to a very good future. standards and 80 percent of prospective and minds. A future in which we will be utilizing employees faced with a choice of jobs opportunities, but one in which we also on comparable terms opt for an employer have to address challenges and act that has a social conscience. responsibly. That is what we mean by corporate responsibility—and that is Because that’s what we want to do! what we do! That is Evonik’s response. I am convinced that a responsible attitude towards our Dr. Werner Müller business activities, our employees and all other stakeholders is essential for our long-term success. Because it is vital if we are to create trust and establish Evonik throughout the world as a fair partner committed to sustainable development.

Corporate Responsibility 2007 1 Who is Evonik?

Evonik Industries is the creative industrial A leading specialty chemicals group from Germany focused on three corporation profitable business areas: chemicals, The Chemicals Business Area ranks among energy and real estate. Evonik is one of the global leaders in specialty chemicals. the world’s leading specialty chemicals More than 80 percent of its sales come companies, an expert in power generation from activities where it is positioned from hard coal and renewable energies among the market leaders and it is sys­ and one of Germany’s largest private­ tematically increasing this position. Most sector housing companies. Moreover, it is of the products manufactured by the m For further information see Evonik’s systematically strengthening its market Technology Specialties segment are sold Annual Report 2007 leadership in all these areas. In 2007 to companies in the chemicals, plastics, Evonik had over 43,000 employees in rubber and paper industries for further more than 100 countries and generated processing into top-of-the-range end­ sales of around €14.4 billion and an oper­ applications. These include organic and ating profit (EBITDA) of over €2.2 billion. inorganic specialties, which are used as Our operations are grouped in eight key inputs in the agrochemicals and business units which are assigned to plastics sectors and in the manufacture of five reporting segments: Technology solar silicon. Hydrogen peroxide is a Specialties, Consumer Solutions, Specialty major bleaching and oxidation agent for Materials, Energy and Real Estate. The the paper and pulp industry. Particles and business units act as entrepreneurs within filler systems based on carbon blacks and the enterprise and report directly to the fumed silicas are mainly used to reinforce Executive Board. The Corporate Center rubber in the tire industry. in Essen (Germany) is responsible for The Consumer Solutions segment’s strategic management of the Group. The main customers are manufacturers of business units and Corporate Center are consumer goods, especially personal care, supported by a Shared Service Center, hygiene, pharmaceutical and nutrition which provides group-wide services such products. Its products include superabsor­ as procurement and payroll accounting. bent polymers for diapers. This segment’s Initially the RAG Foundation (RAG- extensive knowledge of applied interfacial Stiftung) was our sole shareholder. In chemistry enables it to develop solutions June 2008 it reduced its stake to for products ranging from personal care 74.99 percent by selling 25.01 percent to industrial applications such as the stabi­ of its shares to a fi nancial investor, lization of polyurethane foam. Ingredients CVC Capital Partners. for fabric softeners round out the product

A clear structure

Evonik Industries

Chemicals Energy Real Estate Business areas

Industrial Consumer Coatings & Energy Real Estate Business units Chemicals Specialties Additives

Inorganic Health & Performance Materials Nutrition Polymers

Technology Consumer Specialty Energy Real Estate Segments Specialties Solutions Materials

2 Evonik Industries Innovation | Research and development and innovative strength are key elements in Evonik’s corporate strategy. Products, processes and applications developed in the past fi ve years generate over 20 percent of sales in the Chemicals Business Area. Evonik invested €307 million in research and development in 2007. The creative industrial group

portfolio. Evonik is the only supplier stations in Columbia, Turkey and the in the world from which customers can Philippines. In each of these countries it source four essential amino acids for works closely with local partners. Total animal feeds: DL-methionine, L-lysine, rated capacity is over 9,500 Megawatts L-threonine and L-tryptophan. Catalysts, (MW), including around 7,900 MW in custom-tailored substances and active Germany. Long-term supply and take-off ingredients are also used in key starting agreements with major customers products for the pharmaceuticals and life ensure stable cash flows. Evonik is well­ U For further information visit science industries. positioned in the fast-growing future www.evonik.com The products manufactured by the market for renewable energy sources and Specialty Products segment are used in is one of the German market leaders in consumer durables and industrial prod­ mine gas, biomass and geothermal ucts. Its operations are focused mainly on energy. More than 90 percent of district the automotive, coating and colorants heating supplied by Evonik comes from and construction sectors and a wide range co-generation plants. Evonik also ranks at of other high-end applications in fi elds the forefront of the German market in such as aviation engineering, displays, the disposal and reprocessing of power pharmaceuticals and lifestyle articles. Its plant residues. high-quality polymers are used as trans­ parent plastics for semi-fi nished products, High standards of housing high-performance lubricants for hydraulic The Real Estate Business Area manages systems and engines, lightweight struc­ a portfolio of around 60,000 company­ tural components and resins and coatings owned residential units concentrated in additives for the colorants industry. This the federal state of North Rhine- segment also markets specialty monomers Westphalia and has a 50 percent stake in as starting products for polymers. Formu­ THS GmbH, which owns more than lations are often customized to meet 75,000 residential units. The business sp ecifi c requirements. focuses on letting to private households. Evonik comes out above the sector An international power supplier average on the key quality indicators in The core competencies of the Energy this market: vacancy rates and tenant Business Area are planning, fi nancing, fluctuation. Smart concepts are used to building and operating highly effi cient address the entire lifecycle of a property. fossil-fuel power plants. As a grid­ These include, for example, moderniza­ independent power generator, Evonik tion to create energy-saving buildings. operates nine coal-fired power stations Together with carefully planned, cost­ and two refinery power stations in saving running cost strategies, this mini­ Germany. The company’s international mizes the utility charges paid by tenants. successes comprise coal-fi red power

Corporate Responsibility 2007 3 Strategy Where Evonik wants to be

Responding to future needs Background to Evonik’s CR strategy Evonik’s CR strategy

Evonik’s goal is to respond to the central challenges arising from social change and trends, enabling it to increase its business and play a role in the sustained development of society.

4 Evonik Industries Responding to future needs

We live in an age of change. Our net­ For Evonik as an energy supplier and Health & Wellness worked, globalized world entails increas­ a major consumer of energy, especially This megatrend is closely related to ingly fast and far-reaching changes. All in its chemical production facilities, demographic trends. Various reports round the world, people are affected by energy efficiency is especially important. conclude that annual health spending will fundamental issues such as the impact The Chemicals Business Area is therefore rise by over 130 percent between 2000 of globalization, climate protection, the steadily improving its production and 2015 to US$7 trillion, partly because rapid growth of emerging markets, processes and developing more effi cient of the rising average age of the popula­ the shortage of resources, demographic methods of manufacturing its products. tion. In the industrialized countries in change, social justice and the distribution particular, but also in emerging markets, of wealth, and the ethical and social Globalization & Demographic Change increasing prosperity is accompanied responsibility of companies, including As an international corporation, Evonik by rising life expectancy and an increase aspects such as preventing corruption. benefits from worldwide trading as part in the number of health-conscious inhab­ The broader and more enduring these of globalization. The dynamic economic itants who want to maintain their vitality issues are, the greater their impact on development of the emerging markets and therefore make increased use of public awareness. As megatrends they is creating new markets. Demand for wellness products and services. Evonik’s represent enormous tasks for our society, higher-quality products for daily needs, research laboratories develop active politicians and businesses. Evonik’s for example personal care and hygiene ingredients that are required by the innovative products and extensive exper­ products, and for communications cosmetic and pharmaceutical sectors to tise in providing custom-tailored solutions products such as mobile phones, laptops serve these new and established markets. for its customers enable it to respond to and flat screens is increasing in both important megatrends such as Energy Eastern Europe and Asia. At the same time, Efficiency, Globalization & Demographic rising living standards in these countries Change and Health & Wellness. are altering nutritional habits so people are eating far more animal protein. Evonik Energy Effi ciency is utilizing these opportunities through Rising global demand for energy and selective expansion of its presence in limited resources mean we need to fi nd these regions. Wherever it makes sense, new solutions. Evonik is well-prepared the Evonik Group has local production to tackle this challenge. It already markets facilities close to its customers. innovative products, modern materials Demographic change, which experts and extensive system solutions that refer to as “population ageing and popula­ enhance energy efficiency. Power plants tion decline”, also confronts Evonik with built by Evonik are highly effi cient and challenges. At present this situation the company also plays a role in energy mainly affects the industrialized countries. generation from renewable resources. Declining birth rates suggest that it will The Chemicals Business Area offers a become increasingly difficult to fi nd skilled wide range of solutions for applications staff in the future. Moreover, Evonik such as mobility and communications: has to face up to a rise in the average age Lightweight components for airplanes, low of its workforce. It is therefore stepping rolling-resistance tires and safer, more up efforts to foster lifelong learning and efficient lithium ion batteries for emissions­ offers employees special health programs. free autos all have their roots in Evonik’s research and development. The Real Estate Business Area is equipping proper­ ties with energy-effi cient technologies, for example, to utilize geothermal energy and solar power.

Corporate Responsibility 2007 5 Background to Evonik’s CR strategy

Evonik’s goal is to respond to the central Another key step in the development challenges arising from social change and of the CR strategy was a workshop in trends, enabling it to increase its business April 2008 which laid the main founda­ and play a role in the sustainable develop­ tions for the strategy. In a keynote ment of society. To achieve this goal, the address, Dr. Günther Bachmann, General Evonik Group drew up a new Corporate Secretary of the German government’s Responsibility (CR) strategy in the fi rst Sustainable Development Council, out­ half of 2008. lined the central CR challenges facing U For further information visit The development of this strategy was Evonik. He made it clear that society and www.nachhaltigkeitsrat.de/en/home/ led by a Steering Committee comprising politicians place enormous expectations the heads of the relevant Central Depart­ in the corporate sector. Bachmann sees ments at the Corporate Center and the corporate responsibility as a genuine Labor Directors of all three business opportunity for companies providing they areas. The Steering Committee is chaired align it to their business. His conclusion: by the Head of HR Strategy, HR Policy & “CR should help earn money.” However, Labor Relations and its work is supported to do that every company needs to by a coordination group. develop its own strategy and set its own Interviews with managers and mem­ targets. bers of the Works Councils in all three The main outcome of the workshop business areas formed the basis for the was to align Evonik’s CR strategy to its CR strategy. These interviews focused on corporate principles. It is also embedded the general perception of CR, specifi c in the company’s corporate values and challenges facing the business areas and core competencies. The three corporate Evonik’s corporate identity. Virtually values “courage to innovate”, “sparing everyone asked agreed that responsibility no effort” and “responsible action” guide and reliability are key elements of employees in their daily work and Evonik’s identity. Despite the heteroge­ decisions. The four core competencies— neous nature of the Group’s business, creativity, specialization, self-renewal there is a common identity which is and reliability—form the pillars of the expressed, for example, in responsible Evonik brand and help employees treatment of employees. Those inter­ drive the successful development of the viewed stressed that—despite the need Evonik Group. for an overarching strategy—it was important to leave sufficient scope for implementation within the business areas.

6 Evonik Industries Principles

Evonik’s CR strategy • is consistent with the corporate strategy and positions corporate • is an expression of its overall corporate responsibility close to the business. responsibility. • incorporates and strengthens • is characterized by credibility and Evonik’s central identity: innovation, reliability. reliability, fairness, a long-term focus and a commitment to value and • is applicable for the entire Group and quality. provides a binding framework for everyone. • takes account of Evonik’s focus on B2B activities. • takes account of Evonik’s decen­ tralized structure and leaves the • focuses on employees. business areas leeway to implement it in keeping with their operational business.

CR workshop | More than 20 employees discussed the importance of corporate responsibility for the Evonik Group at a workshop held in April 2008. The main outcome was to align the CR strategy to Evonik’s corporate principles. Reliability and credibility

Corporate Responsibility 2007 7 Evonik’s CR strategy

Creativity Evonik’s CR strategy integrates corporate responsibility into its core business and shows its relevance for the business. orate strat orp egy R C e rt s o p ff o e n s o i n b l g e a in r c a t E i p m o s n S e p s s lo e y c e S o e r p l s e a P

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Dimensions of the CR strategy Focus on employees Evonik’s CR strategy builds on its corpo­ Evonik is characterized by a responsible, rate values and core competencies. The employee-oriented corporate culture. three dimensions of the CR strategy—the That includes fair treatment of employees business, employees and processes—form around the world and involving them in an integral part of Evonik’s corporate implementation of the principles of strategy and give it new impetus. At the corporate responsibility. same time, the CR strategy helps ensure that Evonik lives its corporate values. It Best-in-class processes supports the central goals of profitable Evonik continually aims to maximize its growth and value creation and fosters clear performance in its day-to-day business differentiation from competitors. and all areas of corporate responsibility, from the environment, safety and health Contribution to the business through human resources management Evonik responds to megatrends such to compliance. as Energy Efficiency, Globalization & Demographic Change and Health & Wellness as well as to new ecological and social challenges. They form the basis for the development of new business and thus support sustainable development.

8 Evonik Industries Main areas of action Processes: Evonik’s main areas of activity in the fi eld of corporate responsibility are derived CR performance from the three dimensions defined in its Consistent and continuous improvement CR strategy. Specific targets and measures in relevant areas such as human resources, will be defined and the CR program will markets and customers, supply chain, be continuously evaluated and adapted. energy efficiency, the environment, safety, health, product stewardship, compliance Business: and corporate citizenship, within the framework of strategic specifi cations. CR Issues Management Establishment of CR Issues Management Sharing experience as an “early warning system” to avoid risks Identifying and disseminating best arising from ecological and societal practices and sharing experience in order developments and to provide impetus for to raise efficiency and reduce costs. strategies and innovations.

Dialogue with stakeholders Strategic CR objectives Establishment of a continuous and systematic dialogue with stakeholders to Business identify their needs and derive oppor­ CR plays a central role in enabling Evonik tunities. to turn megatrends into opportunities, innovations and successful business Projects prosp ects. Realization of group-wide projects resulting from CR Issues Management Employees and dialogue with stakeholders. CR is integrated into vocational training and further education and into the Employees: objectives agreed with staff.

Responsible treatment of employees Employees Stepping up key HR activities such as CR dominates Evonik’s corporate culture, vocational training and further education, is implemented by all employees within diversity, balancing career and family life, their field of influence and fosters their preventive health care, change manage­ creativity and innovative capacity. ment and employees’ rights. Processes Motivation and involvement All business units control and measure Involving employees, as key players and their contribution to CR through key multipliers, in the implementation of performance indicators (KPI). corporate responsibility through activities to raise awareness and motivation, training and the agreement of specifi c objectives for their work.

Corporate Responsibility 2007 9 Status Where Evonik stands today

Contribution to the business Focus on employees Best-in-class processes

Evonik’s contributions to sustainable development provide a sound foundation for the future implementation of the three dimensions of its CR strategy: the business, employees and processes.

10 Evonik Industries Contribution to the business

Key figures for the Evonik Group

in € million 2007 2006

Sales 14,430 14,125

EBITDA (before non-operating result) 2,221 2,157

EBITDA margin in % 15.4 15.3

EBIT (before non-operating result) 1,348 1,179

ROCE (return on capital employed) in % 9.5 8.4

Net income 876 1,046

Total assets 19,800 20,953

Equity ratio in % 25.7 20.6

Cash flow from operating activities 1,215 1,142

Capital expenditures 1,032 935

Depreciation 862 943

Net financial debt 4,645 5,434

Evonik reported extensively on its very Evonik already makes a signifi cant good business performance in 2007. contribution to energy efficiency and is This extremely positive trend continued minimizing its environmental and climate in the first six months of 2008, showing impact. It supplies innovative products that Evonik’s corporate strategy is and system solutions, develops energy­ positioning it on the right track for prof­ efficient buildings and utilizes energy itable growth and sustained value as efficiently as possible in its own creation. Addressing major megatrends processes. At the same time, it is a major such as Energy Effi ciency, Globalization energy generator. & Demographic Change and Health & Wellness enables Evonik to gain a More efficient energy generation from foothold in tomorrow’s growth markets hard coal and support sustainable development. The Evonik Group uses modern coal-fi red power plants and also generates energy Energy efficiency at Evonik from renewable resources such as biomass, Evonik has already embarked on a group­ mine gas and geothermal energy. In 2007 wide project geared to this megatrend. the Power Business Line, which groups Based on a feasibility study, it is currently together all Evonik’s hard-coal power establishing an Eco² Science-to-Business plants in Germany and abroad, generated Center (S2B Center). The Science-to- energy equivalent to 47,554 Gigawatt Business Center concept is based on inter­ hours, a rise of 11 percent compared with disciplinary, cross-sector collaboration the previous year. The increase in volume with university researchers, suppliers and sales was due to the commissioning of a customers along the entire value chain. power plant in Mandanao (Philippines) at The aim of the new Eco² S2B Center is to the end of 2006 and increased demand utilize the market opportunities arising for power from its German power plants. from energy efficiency and climate In 2007 energy generation produced protection even more effectively for 37.5 million metric tons of CO₂ emissions. Evonik in the future.

Corporate Responsibility 2007 11 Energy | Evonik generates heat and electricity from renewable resources. It also manufactures products that help customers use renewable energy resources. Renewables

Evonik is currently building Europe’s Together with other power generators most advanced power plant fueled such as E.ON, RWE, Vattenfall and by hard coal in Duisburg-Walsum. This EnBW, universities and major research 750 MW power station will have net centers, Evonik is involved in the efficiency of over 45 percent, ensuring COORETEC research and development more efficient use of resources and program established by the German reducing CO₂ emissions. Successful retro­ Ministry of Economics and Technology. fitting has been completed to improve the This program is developing technology efficiency of the power stations in Voerde, to reduce CO₂ emissions. To raise the Lünen and Herne in Germany. This has efficiency of hard-coal power stations, greatly improved efficiency, resulting in a steam temperatures need to be lifted to significant reduction in CO₂ emissions. over 700 °C. This is where COORETEC Research in the Energy Business Area comes in: It is working on the properties focuses on safe, economical and environ­ of nickel-based steel alloys that meet mentally compatible energy supply. the specifications for use in power plants.

Energy sales and CO₂ for the Energy Business Area

2007 2006

Energy supply by business line1)

Power in GWh 47,554 42,881

Renewable Energies in GWh 3,639 2,782

Trading million metric tons raw coal 39.2 41.2

CO₂ emissions2)

Total in million metric tons 37.50 32.55

1) Energy sales comprise both electric and thermal energy; thermal energy has been converted into the equivalent amount of electric power. 2) Based on generation of power and heat.

12 Evonik Industries More renewable energy sources than carbon dioxide. However, if it is used Evonik is well-positioned in the fast­ to produce heat and power it is not growing future market for the use of released into the atmosphere. Moreover, renewable energies and is one of the the use of other fuels is avoided. German market leaders in power plants Evonik offers the photovoltaics industry that use mine gas, biomass and geo­ innovative products and technologies so thermal energy. The Renewable Energies that sufficient solar silicon can be made Business Line raised supply by 31 percent available for the production of solar to the equivalent of 3,639 Gigawatt hours modules for this high-growth sector. in 2007. This business line operates a total Evonik is the market leader in ultra-pure of ten biomass plants which converted chlorosilanes, the starting material for around 400,000 metric tons of scrap solar silicon, and is also working with the lumber into 308 Gigawatt hours power German company SolarWorld on a new and 314 Gigawatt hours heat in 2007. process for far more energy-effi cient At a total of three projects in Germany, manufacture of solar silicon. Evonik is 155 Gigawatt hours heat were produced planning investment running into triple­ from geothermal energy. Mine gas can digit millions of euros in the coming years be used to generate heat and power. It to strengthen its position in the attractive contains methane (CH₄), which is twenty­ photovoltaics market. one times more relevant for the climate

Energy and CO₂ data for the Chemicals Business Area

in terajoules 2007 2006

Energy inputs (net)

Gas 30,455 30,055

Coal 24,860 25,276

Fuel oil 1,241 854

Power sourced from/supplied to third parties 8,450 8,332

Steam sourced from/supplied to third parties – 7,996 – 7,059

Total 57,010 57,458

in million metric tons 2007 2006

CO₂ emissions1)

Energy-related CO₂ emissions (from energy inputs, net) 4.74 4.85

Process-related CO₂ emissions 3.34 3.10

Total 8.08 7.95

1) Based on energy requirements; excluding power generated in power plants at the chemicals sites and energy supplied to third parties.

Corporate Responsibility 2007 13 The chemical industry needs energy Ongoing process improvements In 2007 Evonik’s chemicals sites used Evonik is continuously optimizing its 57,010 terajoules of energy, 1 percent chemical production processes. Alongside less than in 2006. The resultant energy­ process-related improvements, Evonik related CO₂ emissions dropped by sees especial potential in replacing petro­ 2 percent to 4.74 million metric tons. chemical feedstocks by renewable raw Since the Chemicals Business Area raised materials from sustainable production. output by 5 percent year-on-year, that Renewable resources already account for equates to a 6 percent reduction in 7 percent of the raw materials used energy-specific CO₂ emissions. This was in Evonik’s fermentative and chemical partly due to a further improvement in pro duction processes. the efficiency of energy generation and energy supply. Products to increase energy effi ciency CO₂ emissions resulting directly from Evonik offers industrial customers and chemical processes were 8 percent higher end-users innovative products and in 2007 than in 2006 at 3.34 million solutions that save energy. Tires produced metric tons. Relative to production, with the latest technology and Evonik process-related CO₂ emissions thus products cut rolling resistance by up to increased by 3 percent. Reasons include 40 percent. That reduces fuel consump­ higher output and the acquisition in fall tion and brings a perceptible reduction in 2007 of the remaining 50 percent stake CO₂ emissions. in the former carbon black joint venture Degussa Engineered Carbons in the USA. Consequently, this company is now fully consolidated in the fi gures. Overall, energy- and process-related emissions of greenhouse gases (including N₂O and CH₄) from the production of chemicals rose by 2 percent to 8.153 million metric tons CO₂ equivalents, but declined relative to output.

14 Evonik Industries ROHACELL® high-performance years to around 0.3 million metric tons. polymer is far lighter than common Every year, Evonik modernizes around engineering materials yet meets all one thousand residential units to the requirements for tenacity, stability and sta ndard defined in the latest version of temperature resistance. It is used in the German Energy Saving Ordinance. planes, helicopters, autos and ships to On average, annual CO₂ emissions from m For further information on Evonik’s reduce weight and thus fuel consumption. heating of residential units modernized innovations see the Science Newsletter “elements” Similarly the insulating properties of since 2001 are 15 kilograms per square acrylic sheeting produced by Evonik save meter, 80 percent below than the original energy in greenhouses. The composite level. In the next four years, heating­ ceramic membrane SEPARION® allows related CO₂ emissions will be reduced by the production of safer and more power­ a further 7 percent. ful large-scale lithium ion batteries for In 2007 a complex of 24 residential more efficient hybrid and electric vehicles units originally built in the 1960s was and industrial storage of power generated converted to a “three-liter energy-saving from renewable resources such as wind house”. This pilot project involved install­ and sun. ing the following technology, which is rarely used for standard apartment build­ Environment-friendly heating ings at present: a mini co-generation The Real Estate Business Area develops plant, decentralized ventilation units with and utilizes a wide range of innovative heat recovery, extra-thick insulation of concepts to optimize energy consumption outer walls and special windows with in the present housing stock and equips insulated shutters. The concept includes a new residential units with modern photovoltaic unit on the south side of the energy-saving technology such as geo­ roof. Primary energy consumption at the thermal or solar power. By modernizing complex has been reduced by 87 percent and where necessary demolishing and and CO₂ emissions have been reduced to rebuilding properties, it has reduced CO₂ zero. emissions from homes let by Evonik by more than 10 percent over the past ten

Corporate Responsibility 2007 15 Focus on employees

2007 was a year of major change for attractive employer. These defi ne the Evonik’s employees. At the start of the content and focus of human resources year, the corporate management functions work. The HR strategy is reviewed for Evonik’s three business areas were annually and aligned to meet the main transferred to the new Corporate Center. challenges facing the Group and its Similarly, administrative functions such as businesses. It takes equal account of procurement, IT, accounting, law, taxes internal and external conditions and key and human resources for the individual trends affecting HR strategy. Group companies are now provided in full or in part by the Shared Service Center, Boosting growth and enhancing Evonik Services GmbH. performance Around 2,600 employees from To heighten efficiency and market Group companies and the former owner focus throughout the Group, Evonik RAG Aktiengesellschaft were transferred combined the twelve chemical business to the Corporate Center and the Shared units to form six new business units Service Center. Numerous constructive effective January 1, 2008. In June 2008, agreements were concluded with RAG-Stiftung sold 25.01 percent of the employee representatives to ensure that shares in Evonik to the fi nancial investor the necessary cost-cutting and personnel CVC Capital Partners. Evonik has thus adjustment process proceeds in a socially taken its first step on the capital markets. acceptable manner. In collaboration with The central focus in the next few years representatives of the workforce, Evonik will be on creating value. Evonik needs to also continued to harmonize the regula­ speed up processes, adopt a more entre­ tions applicable at the various companies preneurial, market-oriented focus and from which the Group was created, achieve sustained growth in value. The especially collective agreements on pay aim is to raise the Group’s equity value and conditions. In addition, a uniform from just under €10 billion to €20 billion remuneration system was introduced for within the next five years. The related all executives, managers and exempt changes and opportunities for employees staff at the Corporate Center and Shared will be accompanied by extensive com­ Service Center. munication measures. Evonik’s HR strategy forms the basis for its human resources work. At its heart are five strategic target areas: shaping a value-based corporate culture, change management, HR management, compe­ tency development and positioning as an

16 Evonik Industries Slight reduction in headcount Age structure The Evonik Group had 43,057 employees The average age of Evonik’s workforce at year-end 2007, 3,373 fewer than in was 41 at year-end 2007. One-third of the previous year. The headcount in the employees were aged between 41 and 50 continuing operations increased by 148 to and it is clear that the average age of the 41,550. Around 20 percent of employees workforce will increase further in the are female. Personnel expenses declined future. by around €175 million year-on-year Evonik has introduced various mea­ to €2.8 billion in 2007. The change in sures to tackle the challenges of demo­ the number of employees in the various graphic change because it is becoming segments was attributable to internal increasingly difficult to recruit suffi cient reorganization and further optimization highly qualified youngsters, especially of the portfolio. for technical and scientifi c positions.

Personnel expenses at Evonik1) Number of employees1)

in € million 2007 2007 20062)

Wages/salaries 2,257 Technology Specialties 15,932 14,151

Social security contributions 342 Consumer Solutions 7,969 7,953

Pension expense 158 Specialty Materials 8,384 8,267

Other personnel expenses 16 Energy 4,629 4,890

Total 2,773 Real Estate 457 630

Corporate/other activities 4,179 5,511 1) Continuing operations. Evonik Industries (continuing operations) 41,550 41,402

Evonik Industries (discontinued operations)3) 1,507 5,028

Evonik Industries 43,057 46,430

1) As of December 31. 2) Figures based on structure in 2007. 3) Activities held for sale.

New name | The Group was given a new identity on September 12, 2007 when RAG Beteiligungs-AG was renamed Evonik Industries AG. The announcement of the new name was accompanied by an extensive corporate advertising campaign and special events at many sites. A place in people’s hearts

Corporate Responsibility 2007 17 For example, it is running a special image The impact of demographic change on campaign to attract university graduates, companies in Europe are the central focus young professionals, students and of the Demographic Change Laboratory. trainees. Moreover, the Group is fostering Since 2007 Evonik has been one of the continuous professional training to leading companies in this laboratory, maintain and upgrade employees’ skills together with “econsense”, the forum for and competencies. sustainable development of German The Plan@HR project is designed to business. The Rostock-based Center for assist personnel managers in personnel Research into Demographic Change planning and analyzing demographic has supported this process by creating a developments affecting the company’s demographic risk map which gives a sites and business units. Various business detailed overview of the impact of demo­ U For further information see scenarios are simulated on an IT platform graphic change in Europe. www.evonik.com, Careers and to identify the possible impact of business www.demographic-risk-map.eu or personnel policy on the future work­ Vocational training and further education force or the personnel requirements of a Evonik’s success is built on motivated, particular site or business unit. This can be well-trained staff. In 2007 Evonik used to derive predictions about present invested around €60 million in vocational and future requirements for specifi c job training of young people in Germany. families, qualification levels and age Trainees account for well over 8 percent categories. Plan@HR thus forms the basis of the workforce in Germany, so Evonik’s for sustainable personnel planning. commitment to training young people

Age structure of Evonik’s workforce

Age of employees (continuing operations)

41– 45 46–50 7,184 36–40 6,800 51– 55 5,907 5,568 31– 35 26–30 4,262 21– 25 3,547 56–60 under 21 2,598 2,810 1,944 over 60 390

Average age (total) 40.9

Total sample size 41,010

Not included due to invalid data or because no data are available 540

Total 41,550

As of December 31, 2007.

18 Evonik Industries remains well above the average for Work/life balance German industry. In this way, the company Evonik supports its staff through a range ensures a steady supply of trained staff. of offers to help them combine family life Last year, Evonik’s German companies and working. Flexible working hours and trained more than 2,450 young people on lifetime work accounts give the company more than 40 recognized training courses. and its employees greater fl exibility in Vocational training is concentrated at overall planning of their lives. German its sites in the Rhine-Ruhr-Lippe and employees can use lifetime work accounts Rhine-Main regions and the federal states to save time components that can be used of Saarland and Baden-Württemberg. for training or to retire early. Evonik regards providing young people Health programs, local health cam­ with a sound initial training and teaching paigns and fitness programs at Evonik’s them the skills they need for working sites improve personal well-being and help life as an investment in Germany and part employees maintain a work/life b alance. of its responsibility to society. At some sites, Evonik offers childcare A skills enhancement drive encourages facilities through service providers and employees to upgrade their knowledge thus helps parents combine working with and training. The core elements are semi­ bringing up a family. In addition, the nars, computer-aided self-study programs, company ran vacation programs for chil­ on-the-job training and job-related dren at five of its major sites in Germany programs that enable them to obtain new in summer 2008. This offering is to be qualifications. Evonik pays the cost and extended to further sites in the future. participants are expected to use voluntary Through a cooperation agreement with overtime or vacation for learning purposes. Diakoniewerk Essen, employees with To foster the development of all relatives in need of care can obtain rapid employees, including executives, in line advice free of charge. with their requirements, Evonik has In 2008 Evonik Goldschmidt GmbH created a development landscape whose and Evonik Stockhausen GmbH were content is aligned to its competency model. awarded the “audit berufundfamilie®” This model outlines what the company certificate by berufundfamilie GmbH, an expects of its employees. All new initiative established by the not-for-profi t employees receive the “Evonik Starting Hertie Foundation to provide a range of Kit” to give them an overview of the activities to help workers combine work Group. A special in-house training pro­ and family life. Evonik aims to achieve gram has been introduced to foster group-wide certification in 2009. The experience and achievement, while the certification program is a strategic man­ Evonik Development Programs and agement tool that helps companies intro­ Evonik Peer Exchanges are platforms to duce profitable, custom-tailored solutions encourage interchange between employ­ to help integrate parents into working ees across organizational boundaries. The life. development programs focus principally on Evonik’s competencies whereas the Peer Exchange forums are dedicated to discussing issues of strategic relevance. The “Go for Leadership Excellence” program is based on the philosophy that first-class leadership is essential for fi rst-class results. Its purpose is to ensure that Evonik’s managers are able to prepare themselves and their staff most effectively for present and future challenges.

Corporate Responsibility 2007 19 Best-in-class processes

Well-managed processes are the foun­ A procurement guideline will take dations for Evonik’s activities in all areas account of sustainability requirements in where corporate responsibility plays a the supply chain in the future. role. The keystone is the Code of Conduct, which is mandatory throughout Implementation of REACH the Group. It outlines Evonik’s main The EU Chemicals Regulation REACH corporate policy principles and standards. (Registration, Evaluation, Authorisation The Code of Conduct is binding for all and Restriction of Chemicals) came into employees, compliance is monitored and force on June 1, 2007 and pre-registration sanctions are imposed if the principles of substances started a year later. Evonik are violated. took action early on to ensure that it Evonik’s Global Social Policy, which can implement REACH correctly. That is in preparation, sets out its understanding included setting up an internal project of a corporate culture characterized management organization, compiling by mutual respect, values and equality of data, implementing IT solutions, writing opportunity. It also contains an undertaking to customers and organizing workshops that the company and its employees will for customers and suppliers on compli­ observe generally recognized minimum ance with REACH. Evonik will be pre­ standards throughout the world, for exam­ registering around 3,500 substances. ple, those set out in the United Nations Declaration of Human Rights, the OECD Environmental and safety statistics Guidelines for Multinational Enterprises This is the first overview published by and the Core Labor Standards issued by Evonik of selected environmental and the International Labor Organization. safety data for the entire Group. For an Environment, Safety and Health (ESH) assessment of the environmental impact values and guidelines are binding on of Evonik’s business activities the all operational units in the Evonik Group emissions and consumption data for the worldwide. They define the Group’s Chemicals and Energy Business Areas self-perception and act as a guide to ESH. are decisive. Internal audits are conducted to monitor and evaluate compliance with these guidelines. Measures are also in place to ensure that investment proposals take account of environmental, safety and health considerations.

Code of Conduct | Evonik’s Code of Conduct outlines the basic legal and ethical obligations of all employees and sets out principles for their daily work. Global obligations

20 Evonik Industries Basis of reporting operations in 2006 and 2007. The opera­ The ecological data for the Chemicals tions divested in this period have been Business Area in 2007 show emissions deconsolidated. The data for subsidiaries and consumption at 106 production in which Evonik has a majority stake are sites in 28 countries, which account for included on a pro rata basis. around 95 percent of this business area’s The data for the Energy and Real overall output of 10.35 million metric Estate Business Areas have not been tons of products. The corresponding adjusted for changes in the companies data for the Energy Business Area cover consolidated. Data for companies in approximately 70 locations in four which they have a majority stake are fully countries. consolidated. Further details of the data on Scope of consolidation energy inputs and outputs and carbon The ecological data for the Chemicals dioxide emissions can be found on Business Area comprise emissions and pages 12 to 14. consumption data for the continuing

Power plant residues furnace bottom ash. In Germany, virtually Around 3 million metric tons of power all of these by-products were returned plant residues were generated by the to the economic cycle as construction Energy Business Area in 2007. That was materials or for other applications. A new 13 percent more than in 2006 as a result ultramodern production facility for of an increase in energy generated. blasting agents was completed in Lünen Power plant residues comprise gypsum in fall 2007. Production of blasting agents from flue gas desulfurization (FGD is another attractive way of using power gy psum), fly ash, slag-tap granulate and plant residues.

Power plant residues

in thousand metric tons 2007 2006

Energy Business Area

Power plant residues 3,004 2,652

of which fly ash 1,764 1,465

of which FGD gypsum 738 607

of which furnace bottom ash/slag-tap granulate 502 580

Corporate Responsibility 2007 21 Water consumption The chemicals sites are continuously Evonik mainly uses water as cooling water improving the efficiency of water in power plants and chemical production consumption, for example, through inte­ facilities, to generate steam at power grated systems with graduated water plants at its chemical sites, for chemical qualities and recycling of water with the processes and sanitary requirements. air of recooling plants.

Water consumption

in million m³ 2007 2006

Chemicals Business Area

Water consumption 398 409

of which drinking water 18 18

Energy Business Area

Water consumption 2,930 2,580

Waste while other types of production waste Waste generated by the Energy Business rose 4 percent in the same period. The Area in Germany increased by nearly main cause was a filter press that has since 10 percent to 69,300 metric tons in 2007. been taken out of service, which resulted 72 percent of waste was recycled. in sludge recovered from wastewater Total waste generated by the Chemicals treatment with a high water content. Business Area in 2007 was virtually Construction and demolition waste can unchanged from the previous year at fluctuate considerably because it depends 586,532 metric tons. Relative to produc­ on specific projects. More than half of tion, waste decreased by 5 percent. waste was recycled or used to produce Hazardous production waste decreased energy. by 8 percent between 2006 and 2007,

Waste

in metric tons 2007 2006

Chemicals Business Area

Hazardous production waste 196,961 213,371

Non-hazardous production waste 270,323 259,125

Hazardous building and demolition rubble 37,147 15,808

Non-hazardous building and demolition rubble 82,101 101,138

Total 586,532 589,442

Energy Business Area

Total waste1) 69,300 63,000

1) In Germany.

22 Evonik Industries Emissions into the air raw materials and production volumes. Alongside energy- and process-related Emissions of sulfur oxides were 13 percent emissions of greenhouses gases (see higher in 2007 than in 2006, while section headed “Contribution to the emissions of nitrogen oxides increased by business”), the Group’s main emissions 5 percent and particulate emissions were into the air are sulfur oxides, nitrogen up 4 percent. The main reason for the oxides and particulates. rise in emissions into the air was that the Emissions of sulfur dioxide and partic­ joint venture Degussa Engineered ulates decreased in the Energy Business Carbons was fully consolidated from Area. This was achieved by replacing and October 2007 when Evonik acquired the upgrading flue gas desulfurization units remaining 50 percent of shares in this and a change in the fuel mix. The increase company. Thermal waste air treatment in nitrogen oxide emissions is attributable facilities installed at the end of 2006 to a rise in energy inputs. also had an impact. They reduced volatile In the Chemicals Business Area, organic compounds (VOC) in the emissions into the air depend on the Chemicals Business Area by 35 percent characteristics of the fuel mix used but increased sulfur oxide and nitrogen to generate energy, capacity utilization oxide emissions. at generators, the specific properties of

Emissions into the air

in metric tons 2007 2006

Chemicals Business Area

Sulfur oxides (SOx/SO₂) 26,081 23,045

Nitrogen oxides (NOx/NO₂) 10,823 10,330

Particulates 976 941

VOC (excluding methane) 1,604 2,460

Energy Business Area

Sulfur dioxide (SO₂) 33,600 34,940

Nitrogen oxides (NOx) 36,800 30,820

Particulates 1,204 1,260

Corporate Responsibility 2007 23 Emissions into water continuous process improvements geared The total nitrogen load from chemicals to reducing the amount of wastewater or facilities was 21 percent lower in 2007 eliminating it altogether. The 21 percent than in 2006, while the total phosphorus rise in COD was principally due to load decreased by 14 percent. To minimize changes in the product mix and produc­ wastewater loads, priority is given to tion increases.

Wastewater loads

in metric tons 2007 2006

Chemicals Business Area

COD 6,978 5,777

N 515 652

P 62 72

AOX 3.0 3.0

Heavy metals (As, Cd, Cr, Cu, Hg, Ni, Pb, Zn) 3.9 4.3

Occupational Safety centering on the conduct of each The accident frequency rate (number of employee. Regrettably, Evonik had to occupational accidents sustained by report one fatal accident in 2007. Evonik employees per million working In 2007 there were two operating hours) dropped from 4.1 to 3.4. While incidents at Evonik’s German sites which the ultimate goal naturally has to be zero, involved significant releases of sub­ we have set an interim target of reducing stances: on January 23, 2007 dinitrogen the accident frequency rate to less than tetroxide gas leaked from the Kalscheuren 3.0 by 2014. This will be supported by site and on November 1, 2007 there special technical and organizational was a silicon tetrachloride leak at the measures, especially behavioral methods Bitterfeld site.

24 Evonik Industries Credits

Published by Evonik Industries AG Rellinghauser Straße 1 – 11 45128 Essen Germany www.evonik.com

Contact Communications/Board Offi ce phone +49 201 177-3831 fax +49 201 177-2908 [email protected] Evonik Industries AG Rellinghauser Straße 1–11 45128 Essen Germany www.evonik.com