Identification and assessment of climate-related risks and opportunities
For a detailed description of the approach for the identification and assessment of climate-related risks and opportunities and the estimation of the financial impact, see Strategy section of this Climate Report.
PolyPeptide’s Risk Governance and ERM cover all sites, functions and individuals employed. The Group has implemented a risk management model to identify opportunities and manage risks. Global functions are responsible for identifying, analyzing, mitigating, and monitoring risks as risk owners.
The PMC is tasked with ensuring the robust operation of the ERM framework, encompassing the management of significant risks and the exploitation of opportunities. It undertakes risk analysis in collaboration with the risk owners. In the event of significant unanticipated risks, the PMC promptly reports these to the ARC and the Chair of the Board of Directors. The ARC and the Board of Directors conduct a deep-dive review of the ERM report once per year. The climate related risks with the mitigating measures and opportunities are shown in Table 2a, 2b, and 3. The structured approach to risk management ensures that PolyPeptide continually monitors and improves its handling of key risks, aligning its strategies to mitigate or exploit them as appropriate. This approach is also applied to future business development activities (see Strategy section of this Climate Report).
The Global Director EHS is responsible for the annual assessment of the climate-related scenario analysis and presents the findings to the ITC. If a significant change to the transition plan is required, the Board of Directors has to approve it as part of the annual review.
In 2024, PolyPeptide introduced specific climate-related risk groups to its ERM framework using the following process:
Step 1: Financial impact assessment: Financial impact was evaluated based on its share of the revenues, from low (up to 0.5% of revenues) to critical (more than 5% of revenues).
Step 2: Likelihood (Probability) evaluation: To evaluate the likelihood, Munich Re results were used for physical risks and internal stakeholder survey data for transition risks (see Section Strategy of this Climate Report).
Step 3: Calculation of the Inherent and Converted Risk Score: The Inherent Risk Score was derived by multiplying the financial impact score by the likelihood score and then converted to a scale from Low to Critical.
Step 4: Assessing the Level of Control: The Level of Control was assessed, depending on, for example, the potential impact of risks managed by PolyPeptide.
Step 5: Final Result – Residual Risk Score: The final risk impact result was calculated by combining Converted Inherent Risk Score and Level of Control, as defined within the Group’s ERM methodology.
The result is presented in Table 4.
Climate-related opportunities are not part of the ERM framework, however, there is an established process for monitoring climate-related opportunities, including an annual action plan, defined opportunity owners, deadlines, and an assessment of the implementation.
|
Risk Group |
Risk Name |
Potential financial impact |
Likelihood |
Inherent Risk Score |
Level of Control |
|
Residual Risk Score |
|
Chronic – Temperature |
Heat stress, Water stress |
Low |
Unlikely |
Low |
Limited |
|
Low |
|
Acute – Extreme heat |
Heat waves, Droughts |
Low |
Possible |
Low |
Limited |
|
Low |
|
Acute – Wind/Storm |
Tropical cyclone, Extratropical Storm, Hail, Tornado |
Low |
Unlikely |
Low |
Limited |
|
Low |
|
Acute – Water |
Fluvial flood, Pluvial flood, Flash flood |
Low |
Unlikely |
Low |
Limited |
|
Low |
|
Acute – Fire |
Fire Weather Stress, Wildfires |
Low |
Unlikely |
Low |
Limited |
|
Low |
|
Acute – Solid mass |
Landslide, Earthquake |
Low |
Unlikely |
Low |
Limited |
|
Low |
|
Policy and Legal |
Carbon pricing mechanisms/ increased pricing of GHG emissions |
Low |
Likely |
Low |
Very Strong |
|
Low |
|
Policy and Legal |
Enhanced emissions-reporting obligations |
Low |
Likely |
Low |
Very Strong |
|
Low |
|
Policy and Legal |
Non-compliance with regulations |
Low |
Possible |
Low |
Very Strong |
|
Low |
|
Market |
Changing customer behavior |
Critical |
Possible |
Major |
Moderate |
|
Moderate |
|
Market |
Increased cost of raw materials |
Low |
Possible |
Low |
Moderate |
|
Low |
|
Technology |
Costs of transition to lower emissions technology |
Low |
Likely |
Low |
Strong |
|
Low |
|
Technology |
Transition to increasing recycled content |
Critical |
Likely |
Critical |
Strong |
|
Moderate |
Additionally, the ERM identifies a range of risk types that may interact with climate-related risks. A summary of these is provided below.
|
Risks |
Risk owners |
Mitigation measures |
|
|
Customer relationships |
Global Sales & Marketing |
• |
Contract with specific requirements in terms of sustainability including greenhouse gas emissions and defined rules if targets are not achieved |
|
Manufacturing delays (operational execution) or interruptions |
Global Operations |
• |
Business continuity plans at each manufacturing site, including sharpened sourcing strategy |
|
• |
Insurance |
||
|
Supply chain |
Global Procurement |
• |
Direct engagement with suppliers to mitigate supply chain risks |
|
• |
Supplier contracts with fixed prices |
||
|
Environmental, health, and safety laws and regulations |
Global EHS |
• |
EHS regulation monitoring and compliance assessment |
|
• |
Specific analysis of the regulation in case of important CAPEX projects to identify potential risks and impacts |
||
|
Hazardous chemicals manufacturing and storage |
Global EHS |
• |
Development of emergency and response plan |
|
• |
Business continuity plans at each manufacturing site and facility maintenance plan to anticipate risks |
||
|
• |
Periodical environmental monitoring |
||