On top of this Corbion has, in collaboration with Utrecht University, initiated a pilot study for the application of scenario analysis feasible for small to medium enterprises subject to the non-financial reporting directive (NFRD). Below we provide a summary of the relevant information for the TCFD and the preliminary findings of our scenario analysis pilot.
Under the chairmanship of the Chief Executive Officer, the members of the Executive Committee have overall responsibility for sustainability and decide on the strategy and targets. The Executive Committee shares responsibility for developing objectives and the strategy, determining the risk profile, and implementing strategic and operational policies. The CEO is also head of the Climate Change Steering Committee. The CEO has been given these responsibilities because sustainability is key to Corbion's strategy and hence responsibilities are embedded in the highest management level.
Annually, there are two formal meetings with the full Executive Committee to discuss sustainability. All formal Executive Committee meetings cover climate-related topics. The Climate Change Steering Committee (CEO, CSSO, VP Procurement, VP Engineering, Maintenance, and Technology, Sustainability Director, R&D program lead, and Finance Director) meets quarterly. The Executive Committee members have informal meetings as well, covering whatever important matters arise, varying from sustainability and climate change to risks and profits.
To encourage our employees to address climate-related issues, both the Short-Term Incentive Plan (STIP) and Long-Term Incentive Plan (LTIP) include Sustainability targets. One of these targets is the progress towards achieving our Science Based Target.
Corbion closely monitors the increasing risks associated with a warming climate. Although we have not identified any acute (<1 year) or significant medium-term (1-5 years) risks related to climate change, there are some risks that Corbion might be exposed to in the future. The currently most relevant physical climate risks for Corbion relate to the increased severity of extreme weather events and potential supply-chain disruptions if key suppliers are adversely impacted by climate change. Key transitional risks come from potential government regulation and shifts in consumer preferences. Corbion is committed to early action in anticipation of these risks to limit potential impacts.
Due to the nature of Corbion's businesses there are also opportunities related to climate change. For Corbion, sustainability and climate change are drivers for innovation. Opportunities present themselves most prominently in relation to the transition toward a low-carbon economy. Examples include PLA bioplastics (through our joint venture with Total) and our Algae Ingredients platform.
In order to identify and better understand the current implications of future events Corbion has explored the use of scenario analysis in collaboration with Utrecht University. In line with the TCFD recommendations we have assessed the potential impacts of both a transition risk (<2⁰C warming by 2100) and physical risk (±4⁰C warming by 2100) scenario on parts of our business. Over the course of two workshops senior managers were challenged to guide Corbion through a series of relevant events. In the first workshop the focus was on potential transitional events that could have an impact on Corbion's business, whilst the second workshop focused mostly on
physical risks. Providing the basis for the workshops were the scenarios developed by Ansari & Holz (2019) published in Energy Research & Social Science. These scenarios were supplemented with reports from the IPCC (2014; 2019) and the McKinsey Global Institute (2020). On top of this various sources for specific (local and regional) developments were consulted.
Key assumptions for the transition risk scenario included a carbon price ranging from €50 - €150/t CO equiv, either globally or locally implemented, stricter governmental regulations on different fronts, and increasing competition between natural and agricultural lands with the consequential competition between food and non-food crops.
Key assumptions for the physical risk scenario included an increase in the number and/or intensity of extreme weather events, increased water stress in certain areas with corresponding yield reductions in agricultural areas, supply-chain disruptions, and a reduced demand for biobased solutions.
Running from 2020 to 2040 the key takeaway from the scenario workshops was the loading of transition risks in the upcoming decade transforming to mostly physical risks in the 2030s and beyond. As a pilot exercise the main outcomes were related to the creation of awareness in senior management of the potential impact and timing of climate-related risks and subsequent inclusion of climate-related risks in the enterprise-wide risk management.
Many of the identified short- and medium-term risks and opportunities were already part of day-to-day decision-making. The scenario analysis has given them a more explicit place in the company's risk management strategy in relation to climate change. In this section we will shortly argue why we think the identified risks are not yet material for Corbion. An increase in the severity of extreme weather events can have significant consequences for Corbion's operations and ability to deliver. However, the projected timeframe of these changes together with the diversified global footprint of our operations and supply chain makes this more of a long-term risk. Also, Corbion uses a small amount of feedstock relative to the respective global markets, making the company less vulnerable to bad harvests and price fluctuations. This means that Corbion will monitor developments in this area regularly, but does not consider it a material risk at this moment.
Supply-chain disruptions can occur for many different reasons. The main difference is that climate-related disruptions can be systemic in nature and therefore have a much more significant impact. However, also for this type of physical risk the long-term timeframe makes the climate-specific part of this risk something that we monitor but not consider material at this moment.Increased governmental regulations with regards to climate change are considered very likely in the near future. Due to our global footprint and presence in the European Union Corbion is subject to many different types of legislation and also some of the most stringent. To anticipate these regulations Corbion is constantly trying to find new ways to reduce its environmental impact, while participating actively in voluntary initiatives such as the Science Based Targets initiative and CDP.
Changing consumer preferences is not just a climate change related risk, as an ongoing trend this is already included in day-to-day management practices. Also, due to the nature of our business we see changing consumer preferences as more of an opportunity than a risk. As we continue to develop and apply scenario analysis we aim to identify potential climate-related risks at an early stage. Once risks and opportunities are identified and deemed (potentially) material in the short, medium, or long term they are included in the overall risk assessment process and assigned a risk owner for management and monitoring. For more details please refer to our CDP disclosure.
Corbion discloses its Scope I, II, and III emissions (see Sustainability statements/Natural capital/Greenhouse gas emissions and CDP). For internal planning purposes Corbion uses a carbon price of €50/t CO equiv. In 2019, Corbion has committed to reduce its Scope I, II, and III GHG emissions by 33% per ton of product by 2030 (base year: 2016). This target has been approved by the Science Based Target initiative, confirming that our current emission reduction plans are in line with the Paris climate agreement to keep global warming well below 2⁰C. Corbion also aspires to use 100% renewable electricity by 2030. The commitment to that ambition is made through the RE100 initiative. In 2020 our use of renewable electricity was 71%.
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