Climate Change Data

Environmental Metrics

ESG Focus Areas

• Sustainability
• Corporate Social Responsibility
• Gender Quota
• Environmental Protection
• Employee Well-being

Environmental Achievements

• Reduced cost of materials ratio from 53.7% to 51.1% due to efficient production and plant closures.
• Reduced personnel expenses due to plant closures.

Social Achievements

• Hosted HOFTEXPLOSION arts and culture festival.
• Addressed gender quota targets in compliance with new Law on Equal Participation of Women and Men in Leadership Positions.

Climate Goals & Targets

Environmental Challenges

• Decreased sales in Hoftex and Neutex divisions due to competition from low-wage economies and the conflict between West and Russia.
• Follow-up costs from factory closures in the Hoftex division.
• Start-up costs at the Chinese production facility.
• Uncertainty about future interest and exchange rates.
• Increased competition from Asian countries.
• Uncertainties about the future development of the automotive sector.
• Difficulties obtaining debt financing.

Mitigation Strategies

• Optimisation of production equipment in the Hoftex division.
• Cost advantages from ready-mades produced in Romanian plant.
• Capacity expansion in Tenowo division facilities and launch of new China-based production facility.
• Interest rate swaps to hedge against interest rate risk.
• Syndicated financing to spread borrower default risk.
• Expansion project at the Reichenbach II plant and trial runs in the new facility.
• Satellite facility for production technology in Hof.
• Expansion investments in the US-based Tenowo Inc. subsidiary.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: HGB (Handelsgesetzbuch)

Certifications: Null

Third-party Assurance: Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Sustainability
• Energy and environmental management
• Safety, quality and sustainability standards

Environmental Achievements

• Introduced measures to further reduce energy consumption

Social Achievements

• Implementation of new personnel policies in the Neutex division
• Continued apprenticeship program

Governance Achievements

• Successful roll-out of the new ERP system in Germany
• Risk management system integrated into planning, controlling and information systems

Climate Goals & Targets

Environmental Challenges

• Difficult market environment, particularly in the household textiles segment
• Weak demand in Germany for household textiles
• Strong fluctuations in customer demand
• Pricing pressure in the automotive segment
• Shift in product range towards more lightweight and therefore low-margin items
• Weak demand on the US market for Tenowo products
• Negative impact of full imports from European competitors on Tenowo's US market
• Difficulties in recruiting staff, particularly in commercial roles

Mitigation Strategies

• Cost-cutting measures (reduction in staff, capacity adjustments)
• Improving efficiency in production and purchasing processes
• Optimising material usage
• Consistent pricing strategy
• Intensified marketing efforts for the TEC range
• Expansion of SUN and TEC ranges
• Opportunities for ready-made pieces in custom sizes from the READY range
• Working with wholesalers and international textile houses for custom designs
• Improvements in production flows, particularly with regard to optimisation of material usage
• Necessary training of local staff

Supply Chain Management

Responsible Procurement

• Certifying suppliers
• Quality standards for raw materials and semi-finished goods

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: HGB (German Commercial Code)

Third-party Assurance: Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft

Environmental Metrics

Governance Achievements

• The Management Board and Supervisory Board have defined target gender quotas pursuant to the “Law on Equal Participation of Women and Men in Leadership Positions in the Private and Public Sector”. The Supervisory Board’s target for the gender quota of the two-person Management Board is still 0%. The Supervisory Board resolved to appoint at least two women members by 31 December 2021. There are currently four women on the Supervisory Board

Climate Goals & Targets

Environmental Challenges

• Difficult fiscal year in 2019 due to international trade conflicts, Great Britain’s decision to leave the EU, uncertainties among customers and suppliers resulting in weakening global demand, threat and imposition of punitive tariffs, fundamental structural shift in the German automotive sector, spread of novel coronavirus (SARSCoV-2) impacting procurement and sales, halting customer and supplier production, impacting the entire value chain.
• Strong competition in the textile industry worldwide, with the most imminent threat coming from Chinese competitors making inroads into the European market. A further increase in competitive pressure, exacerbated by rising raw material prices and growing price pressure from customers
• Fluctuations in quality and price in the procurement market due to the general increase in the global demand for raw materials.

Mitigation Strategies

• Adapting sales and marketing strategy to win new markets and customers, striving for close, positive customer relationships and constantly analysing relevant markets.
• Digitalisation initiatives in production, administration and sales to remain ahead of the industry, leveraging quality assurance systems and tools to reduce the risk of complaints.
• Continually monitoring suppliers and working closely with them to minimise procurement risks, collaborating to take advantage of the growing trend towards transparency as it relates to sustainability in the value chain.
• Close communication between production facilities and international positioning to shift production capacities as needed, implementing management systems, occupational and environmental safety training courses and corresponding insurance policies to counteract risks.
• Connecting production across all sites to use data analysis techniques to produce more efficiently, improve quality and achieve cost savings.
• Using forward exchange derivatives to hedge against currency risk, holding interest rate hedges and continuously monitoring interest rate developments to mitigate potential risks, strictly monitoring the risk of default and covering outstanding customer debts and default risks by trade credit insurance.
• Securing long-term credit lines and making cash and cash equivalents available through a rolling liquidity plan and a multi-year financing plan.
• Working with a law firm and consultancy to mitigate legal and compliance risks, having a data protection officer, data protection coordinators and occupational safety officers, and working closely with external consultants.
• Global sourcing methods to switch to alternative supply sources, production facilities in various regions and countries to reduce international transport routes.

Supply Chain Management

Climate-Related Risks & Opportunities

Sustainable Products & Innovation

• Nonwovens from recycled carbon fibres

Environmental Metrics

ESG Focus Areas

• Sustainability
• Climate protection
• Use of recycled raw materials
• Substitution of environmentally hazardous substances
• Energy-efficient manufacturing

Environmental Achievements

• Developed nonwovens from recycled carbon fibers
• Developed an ECO line of products manufactured from recycled and natural materials

Social Achievements

• Implemented short-time work to adapt personnel costs to lower overall performance
• Established a hygiene concept along with comprehensive protective measures to protect employees
• Offered home office solutions, online seminars, and webinars for further training and education

Governance Achievements

• Appointed Ms. Manuela Spörl as CFO
• Resolved to appoint at least two women members to the Supervisory Board by 31 December 2021
• Set a target of 20% for women in top management below the Management Board by 31 December 2021

Climate Goals & Targets

Environmental Challenges

• COVID-19 pandemic impacting business activities and sales
• Fluctuations in raw material prices and quality
• Strong competition from Chinese competitors
• High price volatility and disruptions in international supply chains
• Recruiting highly qualified employees

Mitigation Strategies

• Implemented short-time work and flexible work arrangements
• Continuously monitoring suppliers and seeking development opportunities to minimize procurement risks
• Adapting sales and marketing strategy to win new markets and customers
• Close communication between production facilities and international positioning to respond swiftly to problems
• HR development programs and offering a modern and flexible working atmosphere

Supply Chain Management

Responsible Procurement

• Continuously monitoring suppliers

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: HGB, AktG

Third-party Assurance: Deloitte GmbH Wirtschaftsprüfungsgesellschaft

Sustainable Products & Innovation

• Nonwovens from recycled carbon fibers
• ECO line of products from recycled and natural materials

Environmental Metrics

ESG Focus Areas

• Sustainability
• Climate protection
• Resource efficiency
• Recycled raw materials

Environmental Achievements

• Received STeP by OEKO-TEX® (Sustainable Textile & Leather Production) certification
• Use of recycled carbon fibres to create nonwovens
• Use of recycled or biodegradable raw materials
• Processes yarn made from plastic waste into new products (SEAQUAL initiative)

Social Achievements

• Multiple vaccine campaigns for employees
• Hybrid work concepts
• Personnel development and training programmes
• Continuous adaptation and strict implementation of hygiene and protection concept

Climate Goals & Targets

Environmental Challenges

• COVID-19 pandemic and lockdowns
• Supply chain disruptions and procurement shortages
• Rising raw material and logistics prices
• Semiconductor crisis impacting automotive industry
• Flood damage at Hof production site
• Strong competition from Asian competitors

Mitigation Strategies

• Extensive hygiene and infection control measures
• Worldwide supplier qualification and alternative sourcing strategies
• Short-time work during capacity underutilisation
• Insurance policies for property damage and business interruption
• Investment in IT infrastructure and security
• Employee awareness training on cyber security
• Close customer relationships and market analysis
• Diversification of product portfolio and markets

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Multi-supplier strategy
• Global networks
• Close collaboration with suppliers

Climate-Related Risks & Opportunities

Physical Risks

• Floods

Transition Risks

• Climate change
• Energy policies

Opportunities

• Sustainable products and processes

Reporting Standards

Frameworks Used: HGB, AktG

Certifications: STeP by OEKO-TEX®

Third-party Assurance: Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Nonwovens from recycled carbon fibres
• ECO-Line products from recycled or natural materials

Awards & Recognition

• Not disclosed

Environmental Metrics

Social Achievements

• Adjusted the organization to lower sales and production volumes as part of the restructuring project in the NEUTEX division. The corresponding reduction in permanent staff was mainly achieved through natural attrition, thus allowing NEUTEX to reduce its headcount in a socially responsible manner.

Climate Goals & Targets

Environmental Challenges

• Rising energy prices and inflation along with ongoing material and supply shortages.
• The war in Ukraine had numerous direct and indirect impacts on the economy and a direct impact on our automotive customers’ demand.
• Disruptions in the supply chains, OEMs posted lower than expected production and sales figures and the entire industry adopted a more cautious approach in response to significant uncertainties.
• Material shortages for specific applications at Tenowo, which rendered us unable to fulfill a number of customer orders.
• Loss of a major customer in the healthcare segment.
• Difficult economic climate causing customers to delay a number of strategic projects.
• Challenging conditions in the market for German household textiles.
• Skyrocketing prices for raw materials resulted in higher dyeing costs and lower margins in the Hoftex division.
• Lack of service providers and material supply constraints further delayed investments in fire prevention and modernizing the office building at the Hof location.

Mitigation Strategies

• Targeted price adjustments to partially compensate for cost increases.
• Ongoing efforts to diversify the product portfolio.
• Continuously adapting sales and marketing strategy, entering new markets and acquiring new customers.
• Company-wide energy teams working to optimize production while using less gas and focusing on the diversification of energy sources.
• Creating Group-wide emergency plans in the event of an interruption in the gas supply.
• Investment in a photovoltaic system at the Reichenbach location.
• Streamlining the product portfolio and decommissioning machines to reduce operational complexities and optimize production.
• Staff reductions in the NEUTEX division through early retirement packages and individual severance agreements.
• Close, positive customer relationships and continuous analysis of relevant markets.

Supply Chain Management

Responsible Procurement

• Long-term contracts with suppliers
• Multi-supplier strategy

Climate-Related Risks & Opportunities

Sustainable Products & Innovation

• Nonwovens from recycled carbon fibers
• Products with natural fibers and recycled materials (ECO line)
• Yarn made from plastic waste

Environmental Metrics

ESG Focus Areas

• Sustainability
• Climate Protection

Environmental Achievements

• Processing recycled carbon fibers into nonwovens (TENOWO)
• Offering an ECO-Collection with products made from recycled raw materials (NEUTEX)
• Projects aimed at reducing waste and seconds, energy savings projects

Social Achievements

• Hybrid working model successfully established
• Continued training and qualification measures along with an integrative leadership style
• Social plan provisions for employees affected by Münchberg site closure

Environmental Challenges

• Sluggish global economic development
• High inflation rates and rising interest rates
• Generally declining household textiles market
• Continuous price pressure from foreign producers and significant cost increases
• Shortage of skilled workers
• Intensified competition in the labor market
• Risk of cyber attacks
• Geopolitical uncertainties
• Disruption in the energy supply
• Strong global competitors in the textile industry

Mitigation Strategies

• Maintaining international locations and regularly diversifying the product portfolio
• Construction of a new production facility in Vietnam
• Adapting sales and marketing strategy, tapping into new markets and acquiring new customers
• Energy efficiency improvements and own photovoltaic systems
• Multi-year energy contracts
• Delivering high-quality products, maintaining strong customer relationships, and continuously analyzing markets
• Global capacities to serve customers on-site (TENOWO)
• Long-term contracts and close collaboration with suppliers
• Multi-supplier strategy
• Mix of European and Asian partners for raw materials
• Ongoing monitoring of suppliers
• Appropriate management systems, occupational and environmental safety training, and insurance policies
• Value-based corporate culture, flexible working time models, individual development programs, and continuous further education
• Investing in IT security and regular employee training
• Cyber security insurance
• Close development partnerships with customers and suppliers

Supply Chain Management

Responsible Procurement

• Long-term contracts and close collaboration with suppliers
• Multi-supplier strategy
• Mix of European and Asian partners for raw materials
• Ongoing monitoring of suppliers

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather, storms, heavy rainfall, flooding

Transition Risks

• High energy and raw material costs
• Increased competitive pressure

Opportunities

• Development of energy-efficient products
• Sustainable product innovations with an improved CO2 footprint

Sustainable Products & Innovation

• Recycled carbon fiber nonwovens (TENOWO)
• ECO-Collection (NEUTEX)