Environment

MANAGEMENT APPROACH

Viscofan is a global company that operates in a world whose population and consumption rates increase. The greater use of natural resources and the growing social awareness towards its efficient use therefore require a perspective that joins together economic growth and environmental and social needs to enable a sustainable future. As such, Viscofan acknowledges and undertakes to responsibly protect and preserve the environment and to efficiently use energy and resources. We also believe in the effectiveness of dialogue with our different stakeholders in order to get to know about their concerns and different improvement proposals on this matter.

Viscofan has been participating in the United Nations Global Compact since 2015, clearly in line with its aim towards sustained growth, and with the Sustainable Development Objectives concerning the environment (climate change, conservation of marine resources, protection of ecosystems, sustainable water management).

This company's commitment is based on human rights and on the following principles:

• Maintain a preventive approach that favours the Environment.
• Undertake initiatives to promote greater environmental awareness.
• Encourage the development and dissemination of environmentally friendly technologies.

In this way, the Environment, Health and Safety (EHS) corporate policy, defining the values of the organisation and laying down as priorities:

• Identify and comply with applicable legislation and regulation in terms of EHS in each of the locations where the group does business, and any other voluntarily-acquired commitments of Viscofan to improve these areas.
• Pursue constant improvement in all areas of operation, especially in those related to environment, health and safety of employees.
• Responsibly use raw materials, energy and water.
• Ensure that management, employees and all staff working for the organisation, or on its behalf, are aware of this policy and are trained, according to their responsibilities, to comply with it.
• Set indicators to assess the evolution of our performance in these areas.
• Promote a culture of continuous improvement in EHS, defining objectives and implementing corporate standards.
• Develop a cooperation relationship with stakeholders, so as to enable open and objective dialogue, and help ease joint responsibility on these issues.

To ensure the application of the principles contained in the policy, EHS Management guidelines have been developed by the Viscofan Group, setting the common implementation bases for safety, occupational health and environment management systems. It covers a total of 15 guidelines, specifying requirements for many other areas such as regulatory compliance, risk identification and assessment, and environmental aspects or emergency preparedness. Such work continued in 2018 with the implementation at Vector Europe, Supralon and the US subsidiaries.

The importance given to the EHS area is reflected in the advances in environmental management systems and the achievement of sustainable management certificates. In this regard, the ISO 14001 certification in all the production plants should be highlighted as one of the objectives to be achieved in the "2016-2020 MORE TO BE" period. In 2018 the Group made progress in that direction, Viscofan's plants of Belgium and Uruguay certified their environmental management systems according to ISO 14001 standards.

With these certifications the Viscofan Group substantially exceeds the target of certifying quality management systems in at least half of the manufacturing plants (ISO 14001) Although, the target for 2019 is to continue with the certification process of those plants that haven't yet obtained it.

The breakdown of the Group's plants with ISO14.001 certificate is the following:

Plants with ISO14001 certificate

FOCAL POINTS

The Viscofan Group's basic tenets are two-fold, covering and guiding all of the company's environmental projects:

• The sustainable use of resources
• Contribute to avoiding climate change

The sustainable use of resources

The Viscofan Group will approach its sustainability target as it strengthens its capabilities of more efficiently employing available resources, including yet not limited to raw materials, energy or water resources.

Viscofan's manufacturing plants in 13 different countries (including Australia and New Zealand), each one with its specific environmental legislation, present a particular challenge to establish uniform reporting criteria. New resources and tools were incorporated in 2016 to unify the reporting criteria throughout all Group manufacturing plants. New environmental management indicators were established for the MORE TO BE 2016-2020 strategic period, which, including water management, extend the raw materials-production-waste management cycle and also establish direct and indirect CO2 emissions measurements.

Viscofan also encourages measures to promote the values and commitments of the Group among employees with respect to environmental management, highlighting the realisation of training, which is an essential element in the management approach.

Water management

As we are working in an environment where there is a growing demand for industrial water, responsible water management is one of the cornerstones sustaining Viscofan's environmental policy. Viscofan's production process requires the use of water, mainly in phases of the process that involve washing the casings. In general terms, water is obtained from different sources depending on the location of the production plant: surface water, groundwater or municipal supplies. Once the water has been used, the production plants have water treatment plants to treat it before being poured into freshwater or municipal treatment plants.

When managing the impacts related to water use, the Viscofan group has identified key management indicators with a double purpose: optimise water consumption at the company subsidiaries whenever possible and improve the water purification process with a view to reducing the pollution load thereof.

A baseline of 100 was set for the 2015 water usage intensity ratio (cubic metres per metre of production) to track the intensity of our water consumption in the following years.

Water consumption increased in 2018, mainly due to the inefficiencies inherent in the startup processes of the new plant in Caseda (Spain) and increased production linked to the expansion of capacity in Serbia. The increase of water consumption per volume produced is as follows:

Water consumption in cbm / Metres produced

At the Viscofan Group, the total water capture by source type is broken down as follows:

Water consumption by source. In m3

Moreover, the Viscofan Group continues to work on water recycling projects at the production plants in Koteks (Serbia), Pando (Uruguay) and Suzhou (China), where we have managed to reuse 26,635 m3 in 2018 and 9,510 m3 in 2017.

There was no record in 2018 of the organisation's water capture significantly affecting any water sources. All captures are strictly regulated by the public sector, which assign permits and determine the maximum permitted capture volumes to preclude significant effects.

Additionally, in terms of waste treatment, Viscofan is aware that proper water management also includes correctly purifying its wastewater and minimising the impact of its activities on the environment. To improve waste management, several projects are being carried out in different plants of the Group.

In Koteks (Serbia), the wastewater treatment plant was expanded in 2018; an improvement project is underway in Caseda (Spain), which is expected to end in 2019. Due to the increase in production capacity at the plant in Suzhou (China), the wastewater treatment capacity was expanded in 2017 with a new technology consisting in the installation of membranes; this and other alternatives are being considered to give more capacity to this plant in 2019.

Wastewater broken down by destination is as follows:

Raw materials and waste

Within the circular economy, an essential point of the EHS policy is to use raw materials efficiently, contribute to minimising the generation of waste, and, insofar as possible, estimate the damages.

This commitment starts in all production locations by choosing the raw materials, both main ones (cellulose, collagen skin, manila hemp, polyamides and natural gas) and auxiliary substances, used for the chemical and mechanical transformation of raw materials throughout the productive process.

Within the objective of an efficient management of raw materials, the Viscofan Group carried out several projects in 2018, including the installation of a new technology for the production of viscose (cellulose and fibrous) casings, which is a step forwards in reducing production waste, among other aspects.

The Group's commitment continues with the reduction of waste generation and the optimisation of its management, prioritising recovery or recycling above other systems such as destruction or disposal.

Waste disposal methods have been determined locally based on local regulations and good practices within the Group, taking into consideration the characteristics of the production process and the raw materials used.

The number of tonnes of waste increased in 2018, mainly due to the inefficiencies inherent in the start-up processes of the new plant in Caseda (Spain) and the increased production associated with the expansion of Serbia capacity. Thus, the tons of waste and the intensity ratio of the waste evolutions is as follows:

The following breakdown is a detail regarding the management of waste and by-products by category:

The Viscofan Group has implemented an environmental management system with a view to preventing spills and leaks, in which it has established management mechanisms and technical control elements. Should they occur, this system has detection, reporting and anomaly correction methods, including ones for predictive purposes.

There were no spills or leaks at Viscofan Group facilities in 2018 that had to be reported to the competent authorities, understood as those that cause damage to the external environment of the facility and must be reported to the corresponding administration.

Contribution to prevent climate change

The Viscofan Group's sustainability approach also focuses on an efficient use of energy with low environmental impact. We strive to promote the rational and efficient use of energy throughout Viscofan's chain of value. To do so, our strategy entails reducing greenhouse gas emissions while mitigating the adverse effects of these gases on our environment.

The casing production process requires a lot of heat, especially in the drying processes. The current technology for obtaining thermal energy through renewable sources is inefficient, making it difficult to ensure the continuity of energy supply in a continuous 24 hours a day and 365 days a year production process.

We understand that efficiency in the use of energy, reducing our energy requirements and making maximum use of the different ways in which this energy is present in our processes, is key to achieving the objective of helping to prevent climate change. Viscofan's strategy for reducing overall CO₂ emissions includes using heat, even in the effluents from our production processes, and replacing systems requiring elevated amounts of energy with more efficient systems.

The internal energy consumption expressed in Giga Wh is the following:

The Viscofan Group also established the energy intensity indicator for analysing the efficiency of harnessing the different forms of energy throughout the organisation. The calculation was made on baseline of 100 for 2016, dividing consumed energy in absolute terms by metres of production.

With energy efficiency in mind, also including the reduction of greenhouse gas emissions, Viscofan invests continuously in new, more efficient technologies in different areas of its processes.

In 2017, at the Caseda plant (Spain), an investment was made to install an energy exploitation system in the drying air that was completed in 2018 with the installation of a second phase of the heat recovery system. Another example was the new and more efficient energy model implemented in Zacapu (Mexico) for reducing gas consumption by 34% and CO₂ emissions by over 1,300 tonnes monthly.

The efficient use of energy when manufacturing packaging is a competitive advantage. As such, the Viscofan Group has cogeneration plants that have allowed greater energy and production savings in Caseda (Spain), with an installed capacity of 48MW, in Zacapu (Mexico), with 0.6MW, and in Weinheim (Germany), with 8.7MW.

Below is the figure of equivalent tons of CO₂ avoided by using cogeneration compared to that theoretically emitted to obtain the steam obtained in cogeneration using conventional boilers in the plants at Cáseda (Spain), Zacapu (Mexico) and Weinheim (Germany):

CO₂ avoided by energy optimization

CO₂ Emissions

The Viscofan Group sells part of the electricity obtained from the Caseda and Zacapu cogeneration facilities that is not used in the production process. The breakdown by sales made in megawatts is as follows: 391.038 MWh at Caseda and 752 MWh at Naturin.

This energy management models lets the Group produce over half of its total energy using ISO 50001 certified energy efficiency management systems. This energy efficiency management system prepares us for compliance with RD 56/2016 on energy efficiency, which concerns energy audits and transposes the European Union's Energy Efficiency Directive (2012/27/EU).

The use of cogeneration as energy and heat generation sources entails a reduction in emissions compared with other conventional steam generation systems. The avoided CO2 emissions in Cáseda, for instance, was 30.5%.

Moreover, with the intention of improving management and analysing polluting gases, information was collected in 2018 from the EHS corporate department regarding other emissions, at a consolidated level. This is the case of nitrogen oxide (NOX) emissions, for which 643 tonnes were recorded in 2018.

Financial resources dedicated to environment, health and safety projects

This growing commitment to sustainability is also apparent in the financial dimension, where the 2018 investments in environmental and H&S projects stood at €5.7 million, representing 7.9% of the Group's total investments.

A large part of the total investment went to the installation of a new gas washer for plant 4 at Caseda, a sulphates crystalliser at Caseda, extension of the water treatment plant at Caseda, the extension of the waste water treatment plant in Serbia, and improvements in fire protection at different Group plants; property security and ergonomic improvements.

There is more information about the resources destined to the protection of the environment in note 25 of the consolidated annual accounts.