Impact, risk and opportunity management

IRO-1 – Description of the processes to identify and assess material impacts, risks and opportunities

The Lufthansa Group’s material impacts, risks and opportunities have been reviewed

For material changes to the Lufthansa Group business model, such as establishing a new business segment or in the event of major acquisitions, the topics in the materiality assessment will need to be re-evaluated. Furthermore, the materiality assessment is to be reviewed annually for changes and relevance, for example as a result of updated analysis findings, changes in stakeholder needs or adjustments to regulatory requirements. In order to identify, evaluate and monitor its material impacts, risks and opportunities (IROs for short), the Lufthansa Group follows a four-stage process that was first developed and implemented in 2024 in order to meet the requirements of the CSRD and ESRS. In the 2025 reporting year, the Lufthansa Group carried out a validation of the previous year’s results. However, the basis was still the materiality assessment process initially carried out in 2024.

The 2024 materiality assessment serves as the basis for validation of material impacts, risks and opportunities in 2025

• 1. Potential impacts as well as risks and opportunities of the core business segment have been reviewed

The 2024 materiality process started with an in-depth review of the core business activities of the Lufthansa Group. They were initially examined in terms of both potential and actual environmental and social impacts. Subsequently, corresponding risks and opportunities for the Company were identified on the basis of these impacts in order to enable a holistic assessment of the topics. Individual risks and opportunities that were not directly linked with any identified impacts were labelled in order to highlight their separate significance in the overall context. In identifying impacts, risks and opportunities, the entire value chain was taken into account, including direct and indirect business relationships. This means that the analysis not only included impacts, risks, and opportunities that could arise from relationships with primary suppliers, for example, but also those that could arise from other upstream stages of the value chain, as far back as raw material extraction. Geographically, the focus was on regions in which the Lufthansa Group is most active. In Europe, where the headquarters and main hubs for the Group are located, this included impacts, risks and opportunities related to the Passenger Airlines network. Activities in North, Central and South America, in the Asia/Pacific region, the Middle East and Africa were also analysed in order to take into account region-specific impacts, risks and opportunities.

2. Initial IRO inventory along the value chain is created

An initial IRO inventory was made for relevant sustainability matters as per the CSRD and/or the corresponding ESRS directives. To do this, a description of the value chain was created for each of the core business activities. Based on the value chains and taking into account the relevant stakeholders, the actual and potential impacts as well as risks and opportunities were identified and recorded in the IRO inventory. This was based on the existing risk inventory for the Lufthansa Group, reports for the Lufthansa Group, industry input, public information, reports and databases – for example, the ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) database, which helps identify and assess nature-related dependencies and risks across economic activities – as well as the results of the wide-ranging stakeholder survey from 2023 and the expertise of representatives of the subsidiaries for select impacts, risks and opportunities.

3. IRO evaluation methodology is aligned with risk management

The identification and subsequent measurement of material impacts was done using the “inside out” principle. The analysis addressed how the Lufthansa Group’s business activities along the value chain affect people and nature. These impacts were measured using a method aligned with Group Risk Management. The time horizons into which the impacts were categorised were selected to reflect the time horizons used in the risk management process. The short-term time horizon was set at up to one year, medium-term at one to four years and long-term at four years and beyond. The assessment was based on the period from which the impact is the most likely to be deemed material, with the time period of the highest severity being selected if several time horizons apply.

The severity of the impact was then measured. For positive impacts, the parameters of extent and scope are included, while for negative impacts, extent, scope and irreversibility had to be measured. These assessments were carried out on a scale of 1 (least severe) to 4 (most severe) from a gross perspective. Any mitigating measures were not taken into account in the assessment. For potential impacts, the probability of occurrence was also measured on a scale of 1 (irrelevant) to 5 (extreme). Any established assessment processes were also generally used here.

A justification was also recorded in order to explain each measurement, specifying an expected time horizon, particularly in the case of long-term impacts for which no maximum time horizon is specified under the CSRD. The materiality of each impact was determined based on the severity assigned to it. Potential impacts were measured using a combination of severity and probability in order to determine thresholds for materiality. The Lufthansa Group applied a consistent approach to thresholds for all impacts, risks and opportunities. These are the same as the thresholds applied for external reporting by the Lufthansa Group ERM system. When determining the materiality of potentially negative impacts in relation to human rights, the degree of severity takes precedence above probability of occurrence.

The identification and subsequent measurement of the risks and opportunities was done using the “outside in” principle. As such, external factors were considered that have an impact on the Company and opportunities and risks for the Lufthansa Group were derived from these factors. The assessment of these identified risks and opportunities closely reflects the methods used to measure impacts and, accordingly, the Group risk management methodology, ensuring a coherent approach across all relevant areas. The defined short-term, medium-term and long-term time horizons were also applied. The time horizon was chosen based on when the risk or opportunity was considered most likely to meet the threshold of materiality. The time horizon with the highest level of severity was selected in cases where multiple time horizons were an option.

The extent of each risk and opportunity was first measured. The extent refers to potential impacts on the development, financial position, operating result, cash flow, access to financing or cost of capital of the Company and was measured on a scale of 1 (insignificant) to 5 (critical). This measurement was carried out from an overall perspective, without taking into account any mitigating measures. It took into account factors such as potential financial losses, the degree of long-term damage to the Lufthansa Group, the type of financial impacts on the Group, the extent of operational breakdowns and the impacts on the reputation, business model, liquidity, assets or income of the Lufthansa Group, as well as the potential financial extent of the damage. The scale of opportunities was measured based on the potential improvement in the Lufthansa Group’s financial position, the impacts on business operations and the possible extent of operational improvements.

The probability of the risk or opportunity occurring was then categorised using the expected probability: irrelevant: between once in 50 years and once in ten years; low: between once in ten years and once in five years; moderate: between once in five years and once in three years; high: between once in three years and once in two years; extremely high: at least once in two years. Any established processes, such as existing effective ICS processes, were generally included in the assessment, which contributed to the probability of occurrence being downgraded.

If the extent and/or probability of occurrence exceeded the defined thresholds, the relevant risk or opportunity was deemed material. In order to categorise the extent and probability, a brief justification was documented for each measurement in this case too.

4. IROs are first evaluated

The impacts, risks and opportunities identified for the Lufthansa Group were initially assessed in 2024 in accordance with the defined methodology by external industry and subject-matter experts, drawing on desktop research and online publications. The results were then validated by internal subject-matter experts at the Lufthansa Group as well as internal representatives of the key stakeholder groups. This involved validating the results with the Investor Relations and Customer Experience departments. In a second validation, the results were analysed from various management perspectives and presented to the management together with an overview of the evaluation process. The management reported back on the materiality of specific sub-topics, which were then sent back to the internal experts and stakeholder representatives in order to ensure agreement with the expertise of the internal experts and to make any necessary amendments. The final results of this extensive validation process were then shared with the employee representatives, the Executive Board and the Supervisory Board.

IRO inventory and material impacts, risks and opportunities are validated and updated for 2025

In the reporting year, the results of the assessment of material impacts, risks and opportunities were subjected to a methodology-based validation. In this context, the IRO inventory was strategically consolidated in accordance with defined criteria, and descriptions were clarified. The methodology used to assess impacts, risks and opportunities remains unchanged, with the exception of an update to the monetary thresholds in the risk management assessment methodology, which were applied accordingly to the 2025 double materiality assessment. As part of a contextual analysis, external developments relevant to the materiality of impacts for the Lufthansa Group were reviewed. A benchmark as well as information from current internal analyses were also taken into account. Based on the results of the internal and external analyses, adjustments were made to the assessment of impacts, risks and opportunities. To validate these adjustments, individual discussions were held with the respective topic owners of the Lufthansa Group. In these discussions, the perspective of external stakeholders was also incorporated via internal representatives. The required adjustments were then implemented and aligned with the Corporate Responsibility department, and subsequently approved by management. In a final step, the results were discussed with the Executive Board, the Supervisory Board and workers’ representatives.

The four-step process for identifying material impacts, risks and opportunities will be further monitored in future reporting years as part of the materiality assessment and adjusted if necessary.

In the current reporting year, the processes for identifying, assessing and managing ESG opportunities are still not fully integrated into the overall management system.

All material impacts, risks and opportunities have always been attributed to the relevant sub-topic in the ESRS framework. As soon as just one individual IRO was evaluated as material, the relevant sub-topic was defined as material.

Connection to risk management was further developed

The ESG risks for the Lufthansa Group were derived in accordance with the CSRD as part of the double materiality assessment described. The underlying risk methodology was adapted to the Group risk management system so that ESG risks identified in line with the CSRD can be incorporated into the Company’s regular risk management process.

The process for identifying, measuring and managing ESG risks in accordance with the CSRD is tailored to the methods used in Group risk management. The risks are recorded and measured by probability and impacts (qualitative and quantitative). In addition to the gross assessment performed as part of the double materiality assessment, material risks were also assessed from a net perspective in 2025. Existing instruments and actions were taken into account. ESG risks identified as relevant in line with the CSRD were also assigned to the respective risk managers and transferred to the central risk management platform. ↗ Opportunities and risk report

Other topic-specific disclosures regarding the materiality process

E2 – Pollution

In addition to the methods and frameworks described in the general approach, no other sites or assets were analysed with regard to pollution because the Lufthansa Group only operates a very limited number of production processes at its sites. Furthermore, the impacts of noise pollution by aircraft were part of the stakeholder surveys carried out in 2018 and 2023, where stakeholders, including representatives from affected communities, were able to submit a quantitative assessment on the sustainability-related topic of noise pollution. Stakeholders were also able to submit qualitative feedback in the form of comments. In addition, the analysis conducted by the Lufthansa Group’s internal experts also took into account knowledge from local dialogue forums involving residents near airports.

E3 – Water and marine resources

In addition to the methods and frameworks described in the general approach, no other sites or assets were analysed with regard to water and marine resources because the Lufthansa Group only operates a very limited number of production processes at its sites. In this context, a site-based analysis was not a suitable method for the Lufthansa Group to identify material impacts, opportunities and risks.

Furthermore, the potential impacts of the Lufthansa Group on water resources were part of the stakeholder surveys carried out in 2018 and 2023, in which participants were able to submit a quantitative assessment on the sustainability-related topic of water. Stakeholders were also able to submit qualitative feedback in the form of comments.

E4 – Biodiversity and ecosystems

In addition to the methods and frameworks described in the general approach, no other sites or assets were analysed with regard to biodiversity because the Lufthansa Group only operates a very limited number of production processes at its sites. For this reason, a site-based analysis was not a suitable method for the Lufthansa Group to identify material impacts, opportunities and risks.

Dependency on ecosystem outputs was addressed as part of the double materiality assessment described under IRO-1 and specific impacts, risks and opportunities were formulated. In doing so, the upstream and downstream value chain of the Lufthansa Group was taken into account. The defined impacts, risks and opportunities were identified as being not material. The materiality assessment also considered potential opportunities, as well as physical and transition risks, which were also not deemed material. A more comprehensive analysis was therefore not conducted. Systemic risks were not considered within the double materiality assessment.

No consultations were conducted with affected communities regarding shared biological resources or ecosystems because no material negative impacts were determined in this regard.

No actual or potential site-specific impacts, risks and opportunities were identified as part of the double materiality assessment. For this reason, a more detailed evaluation was not conducted to establish whether the Lufthansa Group sites are located near areas that are essential to maintaining biodiversity.

The double materiality assessment did not reveal any actual or potential material impacts that would require the implementation of additional remedial measures.

E5 – Resource use and circular economy

In addition to the methods and frameworks described in the general approach, no other sites or equipment were analysed with regard to resource use and the circular economy because the Lufthansa Group only operates a very limited number of production processes at its sites. For this reason, a site-based analysis was not a suitable method for the Lufthansa Group to identify material impacts, opportunities and risks.

Furthermore, the potential impacts of the Lufthansa Group on resource use and the circular economy were part of the stakeholder surveys carried out in 2018 and 2023 where participants were able to submit a quantitative assessment on the sustainability-related topic of resource use and the circular economy. Stakeholders were also able to submit qualitative feedback in the form of comments.

IRO-2 – Disclosure requirements in ESRS covered by the undertaking’s sustainability statement