Financial implications and other risks and opportunities due to climate change
Our Corporate Sustainability department regularly measures climate-related risks throughout the company. Risk management with regard to the risks and opportunities of climate change is reviewed by the Executive Board and the Supervisory Board every six months. Process-related risks, such as strategy, finance, supply chain, regulatory, innovation, sourcing, compliance, law, etc., are linked to market-related risks, such as trade/market, business/commercial and finance. The aim of this process is to identify and measure significant risks to ensure the positive business development of the Symrise Group.
All risks, including climate-related risks, are identified and evaluated at the regional level with the help of regional experts. They cover the entire range of climate-related issues (transitional and physical issues). Risks are assessed on a gross risk basis. Gross risk is defined as risk without mitigation controls. The risks are analyzed according to the criteria “EBIT effect” and “probability.”
The main criteria for setting priorities with regard to climate change-related opportunities are new business opportunities that address climate change through new technologies and products, which lead to possible new sales, selling points and an improved reputation. Opportunities typically require investments in facilities, R&D or M&A. To make each investment decision, we consider alignment with our business strategy (e.g., the strengthening of our core business), financial performance indicators like ROIs and the impact of our business on sustainability.
Our multidisciplinary, Group-wide risk management with regard to the risks and opportunities of climate change is reviewed by the Executive Board and the Supervisory Board every six months.
Symrise is confronted with a climate-related risk to our reputation. As a result, in screening suppliers our key customers are increasingly focusing on our efforts to reduce greenhouse gases. If these expectations are not met, a devalution of the supplier screening is the result. Our customers (B2B) are focused on climate-friendly ingredients as input for their products. This leads to a substitution of products that shift from carbon-intensive to climate-friendly products. If we did not perform at least as well as our competitors or did not convincingly inform potential customers about our climate-related services, we would expect our market share to decline. We asses this risk as follows: Currently, up to 8 % of our sales are attributed to customers are explicitly concerned about climate issues and ask us to participate in the CDP supply chain program (see also Management approach GRI 302, GRI 303 and GRI 305). This is around € 250 million and thus describes the share of total sales that includes climate-related risk. We assess the respective likelihood based on our climate-related ratings, in particular our CDP evaluation.
Global warming, especially longer and hotter summers, are leading to increasing demand for some of our products. Within the Scent & Care segment, the Cosmetic Ingredients division is significantly affected. One of our key products is sunscreen. Increased quantities of sunscreen are needed for longer and hotter summers. We have already noted a corresponding increase in sales volume, which we attribute, at least in part, to climate change.
Global warming also means increasing demand for other products such as beverages and ice cream, which contain some of our products as ingredients. In total, climate-related products account for around 10 % of our sales in the Scent & Care segment, or € 130 million.
You can find a more detailed description of our approach and additional information on risks and opportunities in our response to the CDP climate change questionnaire under C2. Risks and opportunities at www.cdp.net
As one of currently 785 companies worldwide (TCFD Status Report 2019, June 2019), since 2018 Symrise has also been one of the companies all over the world that supports the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD). You can find a brief description of our activities in this area in the 2019 Corporate Report on p. 18.