Illustration of Climate-Related Risks and Opportunities
In 2023, we evolved our climate risk and opportunity assessment by using climate scenario analysis as well as different time horizons which include short-, medium-, and long-term (up to 2050) timeframes. Climate scenario analysis confirmed our previous findings that the overall global greenhouse gas emission levels will be an important factor influencing the magnitude of risks and opportunities. Moreover, these risks and opportunities will gain relevance for our business, especially in the medium to long term.
We have categorized climate-related risks and opportunities following the ‘Task Force on Climate-Related Financial Disclosures’ (‘TCFD’) framework. Given the different time horizons and complexity of climate-related risks and opportunities, the overview is presented separately from the illustration of risks and opportunities in this Risk and Opportunity Report. We do not expect this to result in any additional major risks and opportunities for the forecast for the 2024 fiscal year compared to the explanations given in the Risk and Opportunity Report.
Physical risks
- Physical damage and business disruption in our own or our business partners’ properties: Extreme weather events and changes in the overall weather patterns could increasingly lead to damages to owned or business partners’ properties (such as office buildings, distribution centers, and retail stores) and inventories, as well as business disruptions. In turn, these could result in lower revenues and higher insurance and operating costs.
- Changing cost and availability of materials: Changes in weather patterns could negatively affect availability of materials, leading to higher operating costs.
- Harm to and lower productivity of our own and business partners’ workforce and decreased participation in sports: An increase in average temperatures and heat waves could lead to harm and reduced productivity of our own and our business partners’ workforce. Changes in weather patterns could negatively influence consumers’ participation in sports, which could lead to decreased consumer demand.
Transition risks (policy and legal, technology, market and reputation risks)
- Energy- and carbon-related prices: Higher prices for energy as well as direct and indirect taxation linked to greenhouse gas emissions could negatively impact our business partners and lead to higher operating costs.
- Exposure to carbon-related regulation and litigation: An increase in regulation (especially product-related), could lead to increased reporting requirements, as well as the inability to market certain products in specific markets. An increase in regulation could also lead to a higher exposure to litigation for non-compliance.
- Cost of low-carbon technologies: High costs for low-carbon technologies could impact our business partners’ ability to lower their emissions, resulting in higher operating costs and potential non-compliance with regulation limiting greenhouse gas emissions.
- Stakeholder scrutiny: A change in stakeholders’ expectations could lead to reduced capital availability and market valuation due to concerns about our resilience to climate change impacts.
Climate-related opportunities
- Development of low-emission products and services: The development of low-emission products and services could address specific consumer preferences and lead to a competitive advantage and increased consumer demand.
- Resource efficiency and increased use of renewable energy sources: The development and use of more efficient production and distribution processes, as well as the increased share of renewable energy (mainly by our business partners), could lead to lower greenhouse gas emissions and improved climate change resilience.
- Improved stakeholder perception: A strong environmental performance, with lower greenhouse gas emissions and improved climate change resilience, could lead to increased capital availability (green financing) and market evaluation, as well as increased employer attractiveness.