Climate change adaptation and risk management
As recommended by the Task Force on Climate-related Financial Disclosures (TCFD), we continue to monitor our risks and opportunities related to climate change. As a company, we’re exposed to physical risks – such as those associated with water scarcity, flooding and weather events – and transitional risks, such as changes in technology, market dynamics and regulation.
For the last seven years, we’ve implemented an internal carbon price for these investment decisions, anticipating the impact of any future carbon pricing. Annually, we quantify the potential transitional risk impact of any global carbon taxation by multiplying our carbon footprint (Scopes 1 and 2) with the internal carbon price. To analyze different potential scenarios, we calculate the impact using a carbon price ranging from €50 to €150 (per ton), the latter being the suggested UN price on carbon. That range results in an impact well below 1% of 2022 revenues.
We continued to assess our suppliers in 2022 and take steps to better understand and manage risks around the globe from a supply perspective.
Physical risks: Natural catastrophes
As climate change will most likely increase the frequency of natural hazards, during 2022, we’ve further analyzed the natural hazards our operations are exposed to.
As part of our risk and insurance process, we collect information about our sites by conducting risk engineering site surveys. Annually, around 20% of sites are assessed following a materiality-based approach.
When it comes to water and the associated availability risk, we used the Aqueduct water risk atlas developed by the World Resources Institute to assess the level of risk at our production locations – an exercise run every three years (see Report 2021). Based on this assessment and benchmarking with other industries, materiality was rated as low (compared to Energy and Waste).
In numbers, around 13% (17) of our sites are in areas rated “extremely high” for overall water risk (with standard weighting factors). These sites are accounting for 9% (175,000 m³) of our freshwater consumption. Future risks, however, for 2030 show that around 30 (25%) of our locations are in areas rated “extremely high”, accounting for 25% of our actual freshwater use.
All locations confirmed as “extremely high” in any of these assessments will develop a risk mitigation plan.