TCFD report
Arbonia reports once more on its climate-related risks and opportunities according to the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). We disclose how physical as well as transition risks and opportunities that could have a financial impact on our company in connection with climate change are identified and handled. This second TCFD report is divided into the areas of governance, strategy, risk management, as well as key figures and targets.
1. Governance
The overarching strategic responsibility for climate-related risks and opportunities lies with the Board of Directors, while operational responsibility lies with Group Management. As climate-related topics affect all areas of Arbonia’s business, they are managed at the highest operational level.
The Board of Directors and Group Management are pursuing a long-term strategy, while always keeping in mind the interests of the company, its employees, shareholders, and the other stakeholders. Once a year, they review the strategy and reporting with regard to the material topics for Arbonia. In collaboration with Group Management, the Board of Directors defines the sustainability strategy, which also includes approaches relating to the climate strategy. The sustainability strategy covers the material topics of emissions and energy, use of resources and circular economy, as well as product responsibility. The reduction of the intensity of greenhouse gases is defined as the central goal and is integrated into the variable compensation for Group Management.
Group Management is responsible for implementing the climate strategy, with the results and degree of target achievement being presented to the Board of Directors at least once a year for review. The CFO is responsible for managing the topic within the Group and develops the climate strategy together with the sustainability management. The companies coordinate individual measures with the Group functions and implement them. Group Management evaluates important initiatives and projects on a monthly basis.
Together with Internal Audit, the sustainability management derives climate-related risks and opportunities for Arbonia and integrates them in the risk management. A further explanation of the governance structure is found in the chapter "Sustainability governance".
2. Strategy
Arbonia’s climate strategy aims to reduce the company’s ecological footprint. We want to play an active role in reducing environmental impacts and promote a more sustainable use of resources. We are committed to continuously optimising our production and supply chain in order to reduce greenhouse gases and minimise energy and resource consumption. For this purpose, we rely on the use of energy-efficient technologies and renewable energies, among other things. Furthermore, we strive for material savings as well as the use of more sustainable materials and want to increasingly use alternatives with fewer environmental effects.
We endeavour to review and improve our climate strategy on the basis of international standards and best practices. Even though the achievement of the 1.5 degree target of the Paris Climate Agreement seems increasingly unrealistic, we use this target as the basis for decarbonising our operating activities. Consequently, we strive for a CO2 reduction target for our emissions from Scope 1 and Scope 2 in line with the Science Based Targets initiative (SBTi). In order to take the emissions in Scope 3 into account in our specific climate targets as well in the future, we committed ourselves to short- and long-term emission reductions in line with the net zero standard of the SBTi in the reporting year.
The analysis of climate-related opportunities and risks that was carried out in 2023 for the first time started with a longlist of relevant physical and transition aspects which comprised recognized scenarios of the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA). As a first step, this list was qualitatively assessed by the risk management and the Corporate Communications & Investor Relations department. The project team developed concrete risk scenarios for selected aspects. In this process, short-term (< 1 year), medium-term (2 – 5 years), and long-term (> 5 years) perspectives were considered. In addition, two scenarios that corresponded to a warming of 1.5 °C – 1.8 °C and > 3 °C were taken into account.
The analysis created in 2023 was reviewed and adjusted in the reporting year. The climate-related effects on Arbonia can be divided into the following three categories:
Physical risks
Physical climate risks encompass direct consequences for companies as a result of climate changes; for example, potential damage to buildings. These risks result from climate change effects such as drought, water shortage, heat, heavy rainfall, and sea level rise. Some of these problems were previously referred to as natural hazards, but climate change is causing an increase in both their extent and probability of occurrence.
Transition risks
Transition climate risks describe indirect effects on companies as a result of the successive decarbonisation of the national economy and arise from ambitious climate protection policies. These are related to factors such as tightening of emissions trading rules, stricter efficiency regulations, or changing market conditions, as well as technological progress.
Climate-related opportunities
The decarbonisation of the economy brings with it opportunities for company-specific growth. The same applies to the climate changes that are expected in the coming decades. Competitive advantages may be achieved by changing the product portfolio, adopting a forward-looking approach to market positioning, and optimising operational processes.
3. Risk management
Arbonia has a centralised risk management system with institutionalized processes. All potential and material risks are evaluated as part of this system. Key parameters for the evaluation include probability of occurrence, reputational damage, and extent of loss. Arbonia’s risk management process is repeated on an annual basis, and the results are reported to the CFO and the Board of Directors.
The risk catalogue of Arbonia already contains a higher-level ESG scenario, which was supplemented by material risks for Arbonia in the reporting year, however. On the one hand, the risks of the topics defined as part of the materiality analysis were integrated in existing scenarios. In the Climate area, these are the topics of "Emissions and energy", "Resource usage and circular economy", and "Product responsibility". On the other hand, the climate-related risks according to TCFD were also included in the risk management during the reporting year. These climate risks are therefore assessed annually. It is reviewed annually whether the climate-related risks considered in the risk catalogue are still relevant, with a view to our own production as well as the upstream and downstream value-added chain.
The characteristics of the previously described categories of climate-related consequences are linked to scenario analyses. Our initial approach at Arbonia was to investigate two scenarios for global warming by the year 2100. As an initial step, these analyses relate to Arbonia’s largest sites. Potential consequences for the entire Group are derived from trend descriptions, forecast ranges, and financial calculations. The consideration of physical risks for the individual locations could not be completed during the reporting year for capacity reasons and will be continued in the next year.
4. Key figures and targets
We strive to determine and implement suitable measures for mitigation of climate-related risks that include the upstream and downstream value-added chain, in addition to our own production.
On the basis of the SBTi guidelines, we have determined a path for reducing our own CO2 emissions (Scope 1 and 2) and defined corresponding targets and measures. We are aiming for an average annual absolute reduction of 4.2% by the year 2035 (reference year 2020). To support the target achievement and check the effectiveness of our measures, we rely on ISO-certified energy and environmental management systems, among other things. For example, Arbonia Glassysteme, Kermi, Garant, and Prüm are certified in accordance with ISO 50001 as well as Kermi and RWD Schlatter in accordance with ISO 14001. We are looking at introducing such management systems in other parts of the company.
The optimisation of energy consumption – and thus the improvement of the CO2 balance – has long since become a task of all companies, departments, and areas of Arbonia. All targets in the area of energy efficiency are defined annually and advanced with corresponding measures.
A large portion of Arbonia’s total emissions are the indirect greenhouse gas emissions in the upstream and downstream value-added chain. We would like to fulfil our responsibility and set corresponding reduction targets here too. As an initial step, we joined the SBTi in 2024 and committed ourselves to short- and long-term emission reduction in accordance with the net zero standard of the initiative.
