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Risks, Opportunities & Impacts​

Lexmark’s social and environmental impacts are divided into three focus areas, and are addressed by corresponding product, operational and community initiatives. Product initiatives correspond to the environment and social benefits of the solutions we develop. These solutions help our customers reduce their environmental footprint, meet the accessibility needs of their workforce and operate in a more environmentally responsible manner.

Lexmark has made great progress reducing the environmental impacts of our operations.

We continue to develop product features and solutions that offer our customers opportunities to reduce the environmental impact of their printing and imaging activities. These efforts are validated by third-party certifications, including the Electronic Product Environmental Assessment Tool (EPEAT), a method for consumers to evaluate the effect of a product on the environment. For more information, go to www.epeat.net.

Operational initiatives encompass all the activities we engage in to reduce our own environmental footprint at Lexmark facilities, and to make Lexmark a better employer and business partner through commitments to human rights and fair labor practices.

Lexmark has made great progress reducing the environmental impacts of our operations. We have become more proficient at using our collaboration intranet system, conference calls, Webinars and video conferencing. These tools are being utilized worldwide and have enabled global conversations and increased productivity.

Community initiatives improve the communities in which we live and work by interacting environmentally and socially.

We have prioritized our corporate community focus on initiatives that support science, technology, engineering, and math (STEM) education improvement, and that promote diversity. By concentrating Lexmark’s resources on improvements in these areas, we have made significantly more progress than by focusing on a broader range of issues. In addition, as Lexmark acquires more companies, we focus on learning from these new communities that we now share, and look for opportunities to combine corporate and community resources to create stronger and more effective community programs.

At Lexmark, we first make sure that we are complying with local statutes wherever we have operations. Then, we balance and prioritize our approach by assessing what needs to be done and how best to do it to meet the needs of all stakeholders as completely as possible. We continue to make significant strides in these focus areas. In 2016 and beyond, we will look for opportunities to strengthen the environmental and social benefits of our product offerings, improve the efficiency of our operations and deliver additional positive benefits to the communities where we live and work.

RISKS AND OPPORTUNITIES

Corporate social responsibility (CSR) trends have driven Lexmark to evaluate the potential of physical risks and regulatory restrictions for our business and to consider potential opportunities to enhance and capitalize on our product offerings. Through this due diligence, we can help our customers achieve their own environmental sustainability and social responsibility goals. The most important risks and opportunities for Lexmark that are related to sustainability trends (a number of which are noted in our annual SEC filings) include the following:

1. ENVIRONMENTAL AND REGULATORY MATTERS

Lexmark operations are subject to numerous laws and regulations; specifically, those relating to environmental matters that impose limitations on the discharge of pollutants and that establish protocols for the treatment, storage and disposal of solid and hazardous wastes. For more information about the impact of Lexmark regulatory topics, see Lexmark Form 10-K.

2. ELECTRONIC WASTE OBLIGATION

The Waste Electrical and Electronic Equipment (WEEE) Directive issued by the European Union requires producers of electrical and electronic goods to be financially responsible for specified collection, recycling, treatment and disposal of past and future products. Our estimated liability for these costs involves a number of uncertainties, and we consider certain assumptions and judgments that include average collection costs, return rates, and product life cycles. Should actual costs and activities differ from our estimates, revisions to the estimated liability might be required. For more information about the impact of waste, see Lexmark Form 10-K.

3. CLIMATE CHANGE

The predictions about the impacts of climate change have led lawmakers across the globe to take a precautionary approach, proposing and implementing new regulations to guide governments, businesses and citizens in their efforts to reduce global warming. These regulations can potentially impact all businesses. Regulations requiring energy reductions are motivating consumers and businesses to replace wasteful equipment with energy-efficient products. Lexmark recognizes that reducing energy consumption is one of the most effective ways to reduce greenhouse gas emissions, a major contributor to climate change. Lexmark’s environmental policies and programs support the reduction of greenhouse gases in our own operations and those of our customers, partners and suppliers.

Climate change and associated weather disruptions can affect the operations of all organizations. Our operations and those of our manufacturing partners, suppliers, and freight transporters are subject to natural and man-made disasters, such as earthquakes, tsunamis, floods, hurricanes, typhoons, fires, extreme weather conditions, environmental hazards, power shortages, water shortages and telecommunications failures. Any of these conditions can disrupt business and can adversely affect our revenue and financial condition by increasing our costs and expenses. As Lexmark continues to consolidate certain functions in shared service centers and moves other functions to countries with lower-cost labor, the probability and impact of business disruptions might increase over time. For each of its sites, Lexmark has a business continuity plan that describes the risks of climate change. For more information about the impacts of operational risks, see Lexmark Form 10-K.

4. PRODUCT OPPORTUNITIES

Lexmark offers a wide range of environmentally beneficial and highly accessible imaging devices and software solutions that help customers print less and meet the accessibility needs of their workforces. Demand for such products and solutions can have a positive financial impact for Lexmark.