Climate Protection
Climate change has been widely recognized as one of the greatest challenges of our time. Shifting weather, increased risk of flooding, and global warming might seriously impair society at large and, thus, Clariant’s business and its markets. Clariant strives to be part of the solution by reducing greenhouse gas emissions and increasing efficiency. The company is fully committed to operating sustainably and decreasing pollution from its business activities.
Decreasing pollution is not only a social mandate, but also part of global legislation. Currently, legislators around the world are implementing measures to mitigate the adverse impacts of climate change. The first binding global step took place at the United Nations (UN) Climate Change Conference near Paris, France, in 2015. Subsequently, 193 states signed the Paris Agreement, which sets out a global framework to limit global warming to below 2 °C and to pursue efforts to limit global warming to 1.5 °C.
The European Union (EU) is implementing its European Green Deal program launched in 2020, with the aim to become climate-neutral by 2050. The EU’s »Fit for 55« climate and energy package is a key legislative effort, targeting an overall reduction of greenhouse gas (GHG) emissions by at least 55 % by 2030, compared to 1990. Likewise, in 2020, China announced that it would scale up its NDCs by adopting more vigorous policies and measures, strive to peak CO2 emissions before 2030, and achieve carbon neutrality before 2060. China is taking pragmatic actions toward these goals. Thus, Clariant continuously monitors and controls air emissions across all global sites to ensure regulatory compliance. In mid-August 2022, US President Joe Biden signed the Inflation Reduction Act (the »Act«) into law in what the White House terms the country’s »most aggressive« attempt at tackling the climate crisis. The Act aims to reduce carbon emissions by at least 40 % by 2030 and transform the US’ climate- and environment-related policies, including by expanding clean and renewable energy production.
Customers demand low-carbon alternatives and renewable energy sources to help them meet their net-zero targets, while an increasing number of financial players are requesting investor-grade data for non-financial information. The US Inflation Reduction Act contains unprecedented measures and incentives in support of GHG emission reduction, clean energy, and clean mobility. Climate protection often goes hand in hand with energy savings that reduce costs, strengthen competitiveness, and trigger business opportunities. Pollution prevention also adds value to the company by minimizing the risk of harming human health and the environment, thus reducing potential liabilities and negative impacts on the company’s brand image.
Clariant constantly optimizes its own operations with regard to carbon and greenhouse gas emissions and pays attention to climate issues along its entire value chain and the life cycle of its products. It offers numerous sustainable products, ranging from catalysts and low-carbon glucamides to second-generation bioethanol. By actively contributing to a carbon-neutral economy, the company also helps its customers to foster climate protection through innovative products and solutions.
Read more on Clariant’s award-winning EARTH technology in the chapter Catalysts
Read more in on our Sustainable leadership award for EnviCat® N2O-S climate campaign in the chapter Resource Efficiency and the Business Review chapter Catalysts
Management approach
Climate change management is the responsibility of Group Innovation & Sustainability (GIS). Within GIS, the Sustainability Transformation team and the Corporate Environmental, Safety, and Health Affairs (ESHA) team manage the topic. GIS works closely together with the business units and with other departments such as Group Procurement Services to reduce Clariant’s operations and supply chain impacts and to deliver low-carbon solutions. Climate is among the topics regularly reported to the Innovation & Sustainability Council and to the Innovation & Sustainability Committee. Success in achieving climate targets is also linked to incentives in the Management Bonus Plan. Read more on our bonus plan here and here
Group Operational Excellence (GOE) is responsible for ensuring that climate and environmental data is being managed in response to increasing demands from the investor community. Read more on TCFD
Climate policies
Clariant prepares for a net-zero roadmap. It pursues ambitious environmental goals and uses its own standards and guidelines for sustainable operations. In 2021, the company introduced science-based climate targets approved by the Science-Based Targets initiative (SBTiSBTiThe Science Based Targets initiative (SBTi) is a partnership between CDP, the United Nations Global Compact (UNGC), World Resources Institute (WRI), and the World Wide Fund for Nature (WWF). The SBTi is the lead partner of the Business Ambition for 1.5°C campaign - an urgent call to action from a global coalition of UN agencies, business and industry leaders, mobilizing companies to set net-zero science-based targets in line with a 1.5°C future. More information: www.sciencebasedtargets.org). These targets mark a significant step forward in Clariant’s sustainability transformation journey. Read more in the chapter Resource Efficiency
In 2021, the company also started to implement a roadmap to achieve its defined climate targets by delivering emission reduction projects. It created strategy roadmaps for Scope 1, 2 and 3 emission reductions and defined milestones.
In 2022, the focus was on executing the roadmap. A core team continuously evaluates the pipeline of ideas and drives the emission reduction projects forward. It also analyzes quarterly the achievements in reducing Scope 3 emissions in view of the target.
Clariant coupled the roadmap with additional measures, for example, an internal carbon-pricing system to improve its carbon footprint.
Furthermore, Clariant’s efforts at carbon emission reductions are strongly embedded in the company’s long- and short-term incentive plans. Since 2022, Scope 1 & 2 emission reduction has been a Key Performance Indicator (KPI) in the long-term incentive plan for the top management population. The short-term incentive plan for the management population includes a target on the reduction of Scope 3 emissions as one of the top priorities. The Scope 3 reduction will be strengthened under the new short-term incentive plans applicable from 2023 by increasing the weighting for this KPI as well as rolling out this KPI to a broader population. From 2024, Scope 1 & 2 reduction targets will be embedded as a KPI in the short-term incentive plan for the majority of employees directly involved in the production processes.
Clariant continuously collects and analyzes data on energy consumption and greenhouse gas emissions in its business units. For example, it runs energy management initiatives like eWATCH™ and the Yield, Energy, Environment (YEE) initiative. The company also runs the Portfolio Value Program (PVP), which integrates sustainability into the product portfolio and innovation pipeline. To enable customers to make informed purchasing decisions on products supporting the protection of climate, the PVP identifies solutions with climate-related benefits, with the best-in-class ones receiving the EcoTain® label. Read more about Resource Efficiency
EcoTain® is Clariant’s sustainability label to highlight products with outstanding sustainability performance. Based on the PVP screening, EcoTain® products significantly exceed sustainability market standards, offer best-in-class performance, and overall contribute to sustainability efforts of Clariant and Clariant customers. Read more on the Portfolio Value Program
Reduction of Scope 1, 2, and 3 emissions
Clariant’s ambitious climate targets provide for absolute reductions of its Scope 1, 2, and 3 emissions. With 2019 as the base year, the company aims to reduce Scope 1 & 2 emissions by 40 % and Scope 3 emissions from purchased goods and services by 14 % by 2030. Clariant’s Scope 3, Category 1, emission target collectively covers more than two-thirds of the total mandatory Scope 3 emissions in conformance with the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard.
These targets are approved by the Science-Based Target initiative (SBTiSBTiThe Science Based Targets initiative (SBTi) is a partnership between CDP, the United Nations Global Compact (UNGC), World Resources Institute (WRI), and the World Wide Fund for Nature (WWF). The SBTi is the lead partner of the Business Ambition for 1.5°C campaign - an urgent call to action from a global coalition of UN agencies, business and industry leaders, mobilizing companies to set net-zero science-based targets in line with a 1.5°C future. More information: www.sciencebasedtargets.org). Clariant’s Scope 1, 2, and 3 emissions are calculated following the GHG Protocol standard, the »Guidance for Accounting & Reporting Corporate GHG Emissions in the Chemical Sector Value Chain,« issued by the World Business Council for Sustainable Development (WBCSD), and follows the financial approach. See the bar chart with the current status of targets
Scope 1 & 2 emissions
Clariant’s direct greenhouse gas emissions (Scope 1) result mostly from combustion processes. They are proportional to the amount of carbon in the combusted fuels. To calculate them, the company uses the standard emission factors of the primary fuels defined by the Greenhouse Gas Protocol.
Clariant’s indirect emissions (Scope 2) are due to external energy purchases in the form of electricity and steam. They correlate to the type of production and the quantity produced. Scope 2 emissions are calculated using either specific emissions factors of local suppliers or country grid factors published according to the standards of the Greenhouse Gas Protocol.
Clariant created the Sustainable Operations Cockpit (SOC) to enable monthly tracking of energy consumption and greenhouse gas emissions. It also provides for more granular reporting using individual conversion factors at the site and plant level. All conversion factors are centrally managed to ensure data security and accuracy.
The new tool was introduced in two sessions attended by almost 200 employees, mainly from operations. They learned about the dos and don’ts to avoid data entry errors. The easy-to-use tool also enables data analysis and benchmarking as a basis for improvement. The tool was successfully audited.
EARTH® technology receives the ICIS Innovation Award 2022 for Best Process Innovation and the Hydrocarbon Processing Award 2022 for Best Refining Technology. The recuperative steam methane reforming technology combines high performance with cost-effective CO2 reduction for large-scale hydrogen production. EARTH® is a pioneering drop-in solution, which was successfully installed at a world-scale H2 plant in Europe with an expected capacity increase of up to 20 % at reduced CO2 emissions and fuel consumption.
For internal and ISO 50001 reporting purposes, Clariant’s eWATCH™ team works closely with site energy managers to calculate site-specific conversion factors. They help benchmark the carbon intensity of different energy sources and utilities and the efficiency of individual utility plants. Against this background, the company identifies opportunities for operational improvement toward the theoretical limit. To reduce Scope 1 & 2 emissions, it focuses on efficiency projects, purchases green electricity, and uses alternative, low-carbon fuels. Read more in Resource Efficiency
Since 2019, Clariant’s direct and indirect emissions decreased by 10 %. The Scope 1 & 2 emissions per ton of product decreased by 5 %. In 2022, Scope 1 & 2 emissions decreased by 13 % year-on-year and the Scope 1 & 2 emissions per ton of product decreased by 1 %. Energy efficiency measures, including heat integration and sun/natural drying, the transition from coal to renewable fuels, and the increase in the share of green electricity contributed to the strong decrease. Long-term power purchase agreements (PPAs) have been established in Indonesia and in the US and contributed significantly to the GHG reduction. In addition, solar panels were installed at various locations. The slowdown in the production volume of the second half-year in 2022 also had an impact on the reduction.
Emissions
| Continuing operations | Discontinued operations | Total 2022 | Continuing operations 2021 | 2021 1 | Continuing operations 2020 | Total 2020 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total emissions (in m tCO2e) | 0.64 | n.a. | 0.64 | 0.71 | 0.82 | 0.69 | 0.83 | |||||||
| in kg/t production | 168 | n.a. | 168 | 164 | 185 | 178 | 205 | |||||||
| Gross direct (Scope 1) GHG emissions (in m tCO2e) | 0.32 | n.a. | 0.32 | 0.37 | 0.40 | 0.36 | 0.39 | |||||||
| Biogenic CO2 emissions | 0.02 | n.a. | 0.02 | n.a. | n.a. | n.a. | n.a. | |||||||
| Direct emissions (Scope 1) in kg/t production | 84 | n.a. | 84 | 85 | 90 | 94 | 96 | |||||||
| Gross market-based energy indirect (Scope 2) GHG emissions (in m tCO2e) | 0.30 | n.a. | 0.30 | 0.34 | 0.42 | 0.31 | 0.41 | |||||||
| Gross location-based energy indirect (Scope 2) GHG emissions (in m tCO2e) | 0.21 2 | n.a. | 0.21 2 | n.a. | n.a. | n.a. | n.a. | |||||||
| Indirect emissions (Scope 2) in kg/t production | 79 | n.a. | 79 | 79 | 95 | 79 | 108 | |||||||
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1 Every three years, Clariant validates environmental data from all production sites. The last full reporting campaign was in 2020, including estimated discontinued data for Business Unit MasterbatchesMasterbatchesThese are plastic additives in the form of granules with dyestuffs or other additives used to dye or alter the properties of natural plastic. for first half-year. In interim years, including 2021, the reduced reporting scope comprises the larger sites responsible for at least 95 % of production.
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2 The value does not include 0.03 m tCO2e relating to PPAs.
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Emissions of ozone-depleting substances (ODS), nitrogen oxides (NOx), sulfur oxides (SOx), and significant others
At the Group level, air pollutants tracked include volatile organic compounds (VOCs), sulfur oxides (SOX), particulates, and nitrogen oxides (NOX). NOX emissions from process and combustion sources are included as a KPI for the Clariant’s sustainability 2030 targets. The company no longer uses ozone-depleting substances. If relevant, it reports cooling agents under the category »greenhouse gases.«
Nitrogen oxides (NOX), sulfur oxides (SOX), and other significant air emissions
| Significant air emissions in tons, for each of the following: | Continuing operations | Discontinued operations | Total 2022 | 2021 1 | 2020 | 2019 | 2018 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total inorganic emissions | 681 | n.a. | 681 | 995 | 915 | 839 | 847 | |||||||
| NOx | 464 | n.a. | 464 | 566 | 540 | 613 | 618 | |||||||
| SOx | 179 | n.a. | 179 | 323 | 248 | 172 | 180 | |||||||
| Hydrogen chloride HCI | 10 | n.a. | 10 | 35 | 45 | 33 | 33 | |||||||
| Ammonia NH3 | 28 | n.a. | 28 | 71 | 82 | 21 | 16 | |||||||
| Total organic emissions (VOCs) | 305 | n.a. | 305 | 374 | 413 | 543 | 439 | |||||||
| Particle emissions (fine particles) (in t) | 311 | n.a. | 311 | 3 671 | 293 | 201 | 294 | |||||||
| Particle emissions (fine particles) (in g/t production) | 82 | n.a. | 82 | 834 | 71 | 47 | 68 | |||||||
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1 Every three years, Clariant validates environmental data from all production sites. The last full reporting campaign was in 2020, including estimated discontinued data for Business Unit MasterbatchesMasterbatchesThese are plastic additives in the form of granules with dyestuffs or other additives used to dye or alter the properties of natural plastic. for first half-year. In interim years, including 2021, the reduced reporting scope comprises the larger sites responsible for at least 95 % of production.
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Scope 3 emissions
Most greenhouse gas emissions at Clariant are »Scope 3« emissions. In the context of the Group climate strategy, Clariant aims to reduce these emissions and has approved science-based targets for purchased goods and services (Category 1): Clariant has committed to reduce Scope 3 (Category 1) emissions from 2019 to 2030 by 14 %. As a baseline, 2019 was chosen, as it was identified as representative pre-pandemic business year that allowed to determine a first full year of Scope 3 emissions. In 2020 and 2021, Clariant analyzed the carbon footprint of purchased raw materials. In 2022, the company focused on priority suppliers, created supplier engagement resources, collected supplier-specific emission factors, and developed reduction plans. Together with other members of the Together for Sustainability (TfS) initiative, Clariant formed a workstream focused on increasing transparency and enabling emission reductions in the value chain. Read more about TfS
Through its membership in the Together for Sustainability initiative, it contributed to the development of a chemical industry guideline on product carbon footprints and corporate accounting for Scope 3 emissions. The guideline, announced by Together for Sustainability in September, harmonizes PCF calculation approaches across the industry and is applicable to the vast majority of chemical products. In the future, this will allow consumers and the wider market to directly compare and assess the climate impact of products. Clariant is also part of the World Business Council for Sustainable Development’s SOS 1.5 Pathfinder Framework on the methodological guidance for the calculation of avoided emissions. The overall aim is a harmonized and state-of-the-art methodology.
In 2021, Clariant undertook several steps to replace conventional raw materials with low-carbon alternatives. This includes the development of ethylene oxide derivatives from renewable sources in the joint venture with India Glycols
Clariant uses standard emission factors based on data from verified sources, such as LCA databases GaBi (Sphere), Ecoinvent, and others to calculate its Scope 3, Category 1, emissions. If available from suppliers, it also considers supplier-specific emission factors after going through an internal validation process. For calculating the total CO2 equivalent emissions, Clariant is using emission data from a data basis that considers characterization factor GWP from IPCC AR5 and expects its suppliers to provide emission factors following the same calculation method. CO2 equivalent data therefore considers CO2, CH4, N2O, HFCs, PFCs, SF6 and NF3. This monitoring allows the company to generate transparency, identify hotspots and reduction opportunities in its value chain, influence suppliers, and induce innovation.
Between 2021 and 2022, Clariant’s Scope 3 emissions from continuing business decreased by 4 %, reflecting the several initiatives implemented, especially on purchased goods and services. Compared to 2019, in 2022 Scope 3 emissions from continuing business decreased by 7 %, while purchased goods and services emissions decreased by 5 %. Clariant measures the emission intensity by total reported Scope 3 CO2 equivalent emissions in relation to the group wide total sales in CHF. The emission intensity of Clariant 2022 continuing business decreased by 19 % compared to 2021. Compared to 2019, the Scope 3 emission intensity decreased by 21 %. This reflects the improvement projects executed during the year. These projects included the purchase of raw materials with lower product carbon footprint as well as increasing the quality and transparency of emission factors of Clariant’s purchased goods and services. Projects are executed in all business segments, in alignment with the business strategies. In total, the activities summed up to a significant portion of the overall reduction in Scope 3, Category 1 emissions compared to the 2021 baseline. Simultaneously, there have been contrary effects, e.g., clarity on emission factors, resulting in higher values. Supplier engagement to support emission reduction remains a key priority for the next few years, as the chapter Working together for a better footprint describes. Transparency and availability of validated and credible supplier specific emission factors of the raw materials purchased gain importance in order to make informed decisions and to execute the strategic roadmap. Read more about TfS
Due to SBTiSBTiThe Science Based Targets initiative (SBTi) is a partnership between CDP, the United Nations Global Compact (UNGC), World Resources Institute (WRI), and the World Wide Fund for Nature (WWF). The SBTi is the lead partner of the Business Ambition for 1.5°C campaign - an urgent call to action from a global coalition of UN agencies, business and industry leaders, mobilizing companies to set net-zero science-based targets in line with a 1.5°C future. More information: www.sciencebasedtargets.org and GHG protocol requirements, biogenic CO2 uptake emissions have been separately identified for purchased good and services and are therefore not included in this category. Clariant is in the process of collecting information on biogenic carbon to be able to disclose the biogenic carbon emissions in the future.
In 2022, the company has introduced its automated product carbon footprint calculator »CliMate.« »CliMate« allows to calculate the product carbon footprint (PCF) of the portfolio, based on standardized production recipes. »CliMate« has been developed together with Mibcon. The automated carbon footprint calculator »CliMate« enables Clariant to offer consistent cradle-to-gate greenhouse gas (GHG) emission data for hundreds of finished products and solutions from across its whole portfolio, in line with the ISO 14067 norm. The powerful new tool is based on leading standards for PCF calculations and is set to be in line with the Together4Sustainability guideline on calculating product carbon footprints. »CliMate« has also been validated by the independent organization TÜV Rheinland. Clariant’s internal team of experts used existing GHG tracking system information and combined it with its product recipes to develop this bespoke solution with support from industry specialists. »CliMate« will enable Clariant to showcase, in a consistent way, PCF improvements over time as it continues to achieve ongoing reductions in emissions within its own operations and from purchased goods and services. The information provided by the calculations will also be used by Clariant to uncover improvement opportunities within its supply chains. Clariant’s current PCF portfolio coverage will expand to ever-wider application areas as supporting information becomes increasingly available from suppliers through the company’s supplier engagement program. Clariant continues to engage with its raw material suppliers so that they might share their carbon footprint data and demonstrate the greenhouse gas emission reductions Clariant expects from its strategic suppliers.
The new automated product carbon footprint calculator »CliMate« enables Clariant to offer consistent cradle-to-gate greenhouse gas (GHG) emission data for hundreds of finished products and solutions from across its whole portfolio.
In two webinars, the company introduced the tool, e.g., to the sales and procurement teams, product development, or the support teams. In the 45-minutes sessions, addressing about 140 employees each, participants learned about climate change, its context to Clariant portfolio, as well as the capabilities of the tool and how it can be used.
In a second webinar, Clariant employees learned more about the complexity of performing product carbon footprints and the value the tool has for customers, including providing reliable carbon footprint data using state of the art calculation approach validated by TüV Rheinland, which can be used as basis calculating the specific carbon footprint of Clariant products. The webinar also highlighted how the PCF Clariant is providing its customers with, is influencing their Scope 3 emissions.
All training sessions were recorded for the internal learning platform and made available to employees for self-learning.
To provide extensive reporting for the Dow Jones Sustainability Index (DJSI) and the Carbon Disclosure Project (CDP), Clariant voluntarily reports on its Scope 3 emissions. It focuses on the categories deemed most relevant for its business: the greenhouse gas emissions from purchased raw materials, fuel- and energy-related activities (not included in Scope 1 or 2), upstream and downstream transportation and distribution, and end-of-life treatment of sold products. These categories cover almost 70 % of all Scope 3 emissions.
Indirect (Scope 3) GHG emissions 1
| Continuing operations | Discontinued operations | Total 2022 | 2021 continuing operations | 2021 2 | 2020 continuing operations | Total 2020 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross indirect (Scope 3) GHG emissions (in m t CO2e) | 3.47 | n.a. | 3.47 | 3.61 | 4.31 3 | 3.34 | 4.20 | |||||||
| Gross indirect (Scope 3) GHG emissions (in kg CO2e/CHF sales) | 0.67 | n.a. | 0.67 | 0.83 | 0.82 | 0.87 | 0.81 | |||||||
| Purchased goods and services | 2.58 | n.a. | 2.58 | 2.70 | 3.19 3 | 2.46 | 3.12 | |||||||
| Fuel- and energy-related activities (not included in Scope 1 or Scope 2) | 0.18 | n.a. | 0.18 | 0.16 | 0.32 | 0.13 | 0.27 | |||||||
| Upstream transportation and distribution | 0.14 | n.a. | 0.14 | 0.11 | 0.12 | 0.11 | 0.12 | |||||||
| Downstream transportation and distribution | 0.13 | n.a. | 0.13 | 0.14 | 0.15 3 | 0.12 | 0.12 | |||||||
| End-of-life treatment of sold products | 0.44 | n.a. | 0.44 | 0.50 | 0.52 | 0.52 | 0.56 | |||||||
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1 Scope 3 emissions are calculated following the GHG Protocol standard
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2 The Scope 3 data does not include all related Süd-Chemie India Pvt. Ltd. emissions.
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3 All figures are rounded, resulting in discrepancies between the total emissions and the breakdown figures.
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Task Force on Climate-Related Financial Disclosures
The framework developed by the Task Force on Climate-Related Financial Disclosures (TCFDTCFDThe Task Force on Climate-related Financial Disclosures (TCFD) was created by the Financial Stability Board to improve and increase reporting of climate-related financial information. The Task Force developed recommendations for more effective climate-related disclosures that promote more informed investment, credit, and insurance underwriting decisions and, in turn, enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system) provides a systematic framework to manage and report on the risks, opportunities, mitigations, and governance resulting from the impacts of the climate crisis. The TCFDTCFDThe Task Force on Climate-related Financial Disclosures (TCFD) was created by the Financial Stability Board to improve and increase reporting of climate-related financial information. The Task Force developed recommendations for more effective climate-related disclosures that promote more informed investment, credit, and insurance underwriting decisions and, in turn, enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system recommends four core elements: governance, strategy, risk management, and metrics and targets. Clariant recognizes that climate change has an impact on its operations and markets, and vice versa. Since the beginning of 2021, the company has been a supporter of TCFDTCFDThe Task Force on Climate-related Financial Disclosures (TCFD) was created by the Financial Stability Board to improve and increase reporting of climate-related financial information. The Task Force developed recommendations for more effective climate-related disclosures that promote more informed investment, credit, and insurance underwriting decisions and, in turn, enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system and in 2022 deepened the analysis of its climate-related risks and opportunities, assisted by an external consultant. Using specific risk analysis software from the reinsurance provider MunichRe and IPCC World Atlas data, Clariant developed a comprehensive and detailed outlook of the exposure toward various physical risks and opportunities in the value chains it operates in.
Clariant’s approach for its second TCFDTCFDThe Task Force on Climate-related Financial Disclosures (TCFD) was created by the Financial Stability Board to improve and increase reporting of climate-related financial information. The Task Force developed recommendations for more effective climate-related disclosures that promote more informed investment, credit, and insurance underwriting decisions and, in turn, enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system reporting year was led by the Sustainability Transformation team, and developed together with the business units and departments such as Enterprise Risk Management, Communications, Operations, Environmental Safety and Health Affairs (ESHA), and Procurement. Risk and opportunity assessment workshops were complemented by a gap analysis and an alignment of governance and reporting.
In the coming years, Clariant envisions a deep dive even further into the risks and opportunities assessment, including their financial quantification, and a more detailed development of climate strategies.
1. Governance
1. a. Describe the Board’s oversight of climate-related risks and opportunities
Within Clariant’s purpose, sustainability and innovation are key pillars of the success of the company. Sustainability transformation of the company is, on the one hand, transforming its operations toward climate neutrality and overall sustainability, and on the other hand, developing sustainable products which in return support Clariant’s customers in their sustainability transformation, helping them to achieve their sustainability targets. With sustainability, one of the key drivers to steer the company’s strategy and portfolio, the Board of Directors ultimately monitors the company’s opportunity and risk management performance – including environmental opportunities and risks. It advises the Clariant Executive Leadership TeamExecutive Leadership TeamThe Executive Leadership Team (ELT) consists of the Executive Steering Committee (ESC) along with the Chief Human Resources Officer, the Chief Technology & Sustainability Officer, the Chief Corporate Development Officer, and the General Counsel. By bringing all key functions together, Clariant ensures fast decision-making while incorporating all internal stakeholders’ needs. The ELT supports the ESC by promoting dialogue among its members, exchange of information and enabling awareness of the Group’s environment. (ELT) in quarterly Innovation and Sustainability Committees (ISC) as well as during the annual performance cycle. Subject of discussion are sustainability-related policies, reporting obligations, and strategies, with a focus on portfolio implications in Environmental, Social, and Governance (ESG) areas. The agenda of the ISC relates to Clariant’s 1+5 sustainability focus areas, including climate-related topics. It also monitors the progress on sustainability KPIs, including Scope 1, 2, and 3 emission reductions and the corresponding roadmaps. It is chaired by a designated member of the Board and is composed of four members of the Board, including the Chairman of the Board as well as the CEO and Chief Technology & Sustainability Officer (CTSO) ex officio.
In addition, the Chief Sustainability & Technology Officer oversees and manages climate risks and opportunities across the company and is part of the Executive Leadership TeamExecutive Leadership TeamThe Executive Leadership Team (ELT) consists of the Executive Steering Committee (ESC) along with the Chief Human Resources Officer, the Chief Technology & Sustainability Officer, the Chief Corporate Development Officer, and the General Counsel. By bringing all key functions together, Clariant ensures fast decision-making while incorporating all internal stakeholders’ needs. The ELT supports the ESC by promoting dialogue among its members, exchange of information and enabling awareness of the Group’s environment..
1. b. Describe Management’s role in assessing and managing climate-related risks and opportunities
Clariant is committed to reducing its footprint and helping customers and downstream users improve their sustainability performance, as well as to procuring sustainably manufactured raw materials. The governance structure reflects Clariant’s responsibility for a sustainable future: at the beginning of 2021, Clariant changed its organizational structure to improve the integration of sustainability and innovation. The Group Innovation & Sustainability (GIS) unit and the Innovation & Sustainability Committee and Council set sustainability and climate targets as well all strategies, while also ensuring their execution. The highest governance level for climate-related risks and opportunities is the Board of Directors’ Innovation & Sustainability Committee (see previous paragraph). The Innovation & Sustainability Council ensures that climate-related aspects are considered in the company’s strategy and operations. The Council meets quarterly and reports relevant climate-related outcomes, including risks and opportunities, to the Board of Directors’ Innovation & Sustainability Committee. It is chaired by the Chief Technology & Sustainability Officer and includes the CEO, the Chair of the Innovation & Sustainability Committee, the Head of Sustainability Transformation, the innovation heads of the business units, and the head of the GIS Program Management Office as permanent members.
The Head of Sustainability Transformation reports directly to the CTSO, and his or her responsibility covers climate-related topics, sustainability-driven innovation excellence (iGarage), as well as sustainability reporting, including the engagement with ESG rating agencies. Clariant has committed itself to SBTiSBTiThe Science Based Targets initiative (SBTi) is a partnership between CDP, the United Nations Global Compact (UNGC), World Resources Institute (WRI), and the World Wide Fund for Nature (WWF). The SBTi is the lead partner of the Business Ambition for 1.5°C campaign - an urgent call to action from a global coalition of UN agencies, business and industry leaders, mobilizing companies to set net-zero science-based targets in line with a 1.5°C future. More information: www.sciencebasedtargets.org targets for Scope 1, 2 and 3 (Category 1) to achieve emission reductions (Scope 1 & 2: 40 % and Scope 3, Category 1: 14 %) by 2030. The implementation and execution of the defined roadmaps to achieve the targets and to manage risks and opportunities is within the responsibility of the different businesses and functions.
At an operational level, the Corporate Sustainability Transformation team manages and coordinates two core teams, which steer the Scope 1, 2, and 3 purchased goods and services emissions. These teams include business unit representatives and relevant functions. Their mission is to support the development of concrete roadmaps for progressing in Clariant’s climate targets, and to identify investment needs, risks, and mitigation activities.
The teams periodically report progress as well as risks and proposed mitigations to the Innovation & Sustainability Council and Committee for guidance. Risk mitigation proposals are reported by the teams to the Executive Leadership TeamExecutive Leadership TeamThe Executive Leadership Team (ELT) consists of the Executive Steering Committee (ESC) along with the Chief Human Resources Officer, the Chief Technology & Sustainability Officer, the Chief Corporate Development Officer, and the General Counsel. By bringing all key functions together, Clariant ensures fast decision-making while incorporating all internal stakeholders’ needs. The ELT supports the ESC by promoting dialogue among its members, exchange of information and enabling awareness of the Group’s environment. for approval.
Climate target achievement on Scope 1, 2 and 3 is additionally incentivized by short- and long-term bonus schemes
2. Strategy
2. a. Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term
Clariant categorizes climate-related, business-relevant risks and opportunities into physical risks, transitory risks, and physical and transitory opportunities. Physical risks comprise events such as extreme weather, storms, and heavy precipitation but also chronic changes in climatic conditions, such as temperature changes or sea level rise. Transition risks, which arise in connection with the transition to a lower carbon economy, emerge in policy and legal, technology, market, and reputational risks. Examples are changing political frameworks, technological developments, and changing market expectations. But both physical and transitory risks also bring along opportunities with climate mitigation solutions as a focus area for Clariant. They arise in the areas of resource efficiency, energy sources, products and services, markets, and resilience. More information on Clariant’s risks and opportunities, including counter initiatives, can be found in Figure 019
019MATERIAL RISK AND OPPORTUNITIES
Most material risks and opportunities
a. Physical risks:
a. 1. Limited insurance capacity / increasing costs for insurance
- Major risk: The increasing frequency and severity of natural catastrophes combined with an accumulation of risks at certain location has led insurance companies to carry significant losses. The financial ability of insurance companies to cover such scenarios can be expected to come to a limit. As a consequence, steep increases in insurance premiums can be expected, as well as the inability to transfer such risks.
- Main initiatives: Risk mitigation measures such as flood defense improvement, business continuity planning, etc. will consequently need to be gradually enhanced where risk transfer mechanisms are no longer available.
a. 2. Process constraints associated with water stress or increasing water temperature
- Major risk: Many manufacturing processes require cooling with river water. Low water levels or river water temperature increase can lead to the interruption of production and loss of business.
- Main initiatives: Clariant has been conducting comprehensive water stress assessments since 2017. Risk mitigations include water efficiency improvements as well as enhanced cooling technologies and energy recovery projects.
b. Transitory risks:
b. 1. Increased prices for energy and raw materials
- Major risk: Geopolitical crises, carbon pricing, and energy shortages would lead to higher operational expenditures and high fossil fuel price dependency.
- Main initiatives: Clariant is actively diversifying its supplier landscape and increasing the share of renewable energies to become more independent of fossil fuels. In its strategies for raw materials, Procurement also relies on multi-sourcing to achieve optimum purchase prices through competition. Digital market analysis as well as regular strategy meetings to assess the raw materials situation are established. Additionally, replacing fossil-based raw materials through low-carbon alternatives reduces dependency of fossil-based price driver.
b. 2. Costs of transition to low-carbon technologies and products
- Main risk: High expenditures required for development of sustainable products, reliable energy supply, and sustainable raw materials, which can impact the company’s overall profitability.
- Main initiative: Investments in sustainable long-term green electricity Power Purchase Agreements increase supply security and optimized expenditures. Another approach of Clariant is to increase efficiency by leveraging cross-industry collaborations and thereby simultaneously increasing the scope and chances for success of innovative and sustainable solutions. Clariant is actively participating in industry forums like the Low-Carbon Emitting Technology Initiative of the World Economic Forum (WEF) to find further cross-industry collaborations.
c. Opportunities:
- c. 1. Development and expansion of products with low product carbon footprint (PCF). An increased need for products with low PCF by customers can be expected. Clariant has developed an automated product carbon footprint calculator (CliMate) which allows to provide the relevant information to the customers. Combined with Clariant’s commitment to achieve its Scope 1, 2 and 3 targets, it positions Clariant to offer products with improved PCF along with the required data transparency.
- c. 2. Use of more efficient production and processes: A significant share of Clariant’s sales, particularly in the adsorbents and catalysts portfolio, is based on products that contribute to the reduction of carbon emissions. The demand in emission reduction and energy efficiency is expected to increase, strengthening the company’s competitive position on the market.
2. b. Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning
Climate-related risks and opportunities have influenced Clariant’s strategy and financial planning in several areas, among which:
- Products and services: Clariant’s carbon footprint is mostly coming from its Scope 3 emissions (>84 % in 2022), so the company’s strategy is not only focused on its own operations, but also covers the value chain. Considering that more than 80 % of the environmental impacts of a product is determined at the design stage. Clariant carries out a comprehensive life cycle-based sustainability assessment of its products during the development phase using Clariant’s Portfolio Value Program (PVP), including an assessment of the impact of the product on climate change across the life cycle of the product. This allows to identify those products that have a particularly beneficial impact on GHG emissions compared to the industry standards or the most recent product generation;
- Supply chain: More than 62 % of Clariant’s 2022 carbon footprint is derived from purchased raw materials. In the future, an increasing share of renewable raw materials will replace fossil-based resources, potentially leading to a reduced product carbon footprint. Starting in 2019 a dedicated workstream was put in place to develop a roadmap to reduce Clariant’s Scope 3 emissions. It started with a deep-dive analysis with a group of internal experts to evaluate the main emission sources, followed by the collection of potential ideas for emission reduction. These ideas were prioritized in terms of technical approval needs, influenceability by Clariant, and potential cost impacts. A systematic approach to engaging with value chain partners is ongoing, with several webinars and questionnaires being sent out for collection of emission factors and emission reduction plans;
- Investment in R&D: Clariant’s climate strategy also aims to boost and incentivize low-carbon innovations, such as the sunliquid® technology and Carbon2Chem® (aimed at using emissions from steel production as raw material for chemicals);
- Operations: At an operational level, Clariant’s Scope 1 & 2 together represent approximately 16 % of the company’s carbon footprint. Although they are lower than the Scope 3, the influence for emission reduction activities is higher. Clariant aims to reduce the absolute Scope 1 & 2 emissions by –40 % until 2030 (base year: 2019). In addition, in 2021, Clariant has introduced an internal carbon price for major capital expenditures to factor into decision-making, ensuring resource allocation toward low-carbon technologies and product offerings, while mitigating the risk of increasingly costly regulations.
Clariant’s corporate carbon intensity (as measured in tons CO2e per mCHF sales) is relatively low compared to the company’s peers. With the main initiatives mentioned above and further quantitative assessments, Clariant can react to both risks and opportunities in different scenarios and is well set up to overcome the climate challenges ahead.
2. c. Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2 °C or lower scenario
Clariant has conducted a qualitative assessment of its climate-related risks and opportunities using different climate-scenarios. For physical risks and opportunities, scenarios from the Intergovernmental Panel on Climate Change (IPCC) 5th Assessment Report were used, called RCP scenarios. The Representative Concentration Pathways (RCP) apply different greenhouse gas concentration and radiation, which can be translated into various global temperature increases:
- RCP 2.6: Well-below-2-degree scenario
- RCP 4.5: 2.5-degree scenario
- RCP 8.5: 4-degree scenario
The scenarios take into consideration different short- to long-term time horizons between 2030 and 2100. For transitory risks and opportunities, the Net Zero Emission scenario (NZE) of the International Energy Agency (IEA) has been applied. It shows a pathway to achieve net zero CO2 emissions by 2050, mainly driven by energy, innovation, and technological changes. It is therefore consistent with limiting global temperature increase in line with the Paris Agreement and allows Clariant to make scenario-based assumptions about the impacts and risks and opportunities associated with the transition to net zero CO2 emissions by 2050.
In 2022, workshops were carried out to review all relevant TCFDTCFDThe Task Force on Climate-related Financial Disclosures (TCFD) was created by the Financial Stability Board to improve and increase reporting of climate-related financial information. The Task Force developed recommendations for more effective climate-related disclosures that promote more informed investment, credit, and insurance underwriting decisions and, in turn, enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system recommended risks and opportunities, including specific impacts for Clariant, potential financial impacts, the likelihood and size of impact to determine materiality, and the identification of main initiatives that address the identified material risks and opportunities. For the workshop, Clariant focused on two climate scenarios to be prepared for, either transitory risks and opportunities (NZE scenario) or a more extreme scenario (RCP 8.5 as 4-degree-scenario) where physical risks materialize the strongest. The result of the analysis, i.e., Clariant’s material risks and opportunities, is described in the climate-related risks and climate-related opportunities tables. In 2023, this analysis will be further developed to include quantitative assessments.
020CLIMATE PORTFOLIO ASSESSMENT1
3. Risk management
3. a. Describe the organization’s processes for identifying and assessing climate-related risks
Identifying and assessing climate-related risks and opportunities at Clariant is performed by a TCFDTCFDThe Task Force on Climate-related Financial Disclosures (TCFD) was created by the Financial Stability Board to improve and increase reporting of climate-related financial information. The Task Force developed recommendations for more effective climate-related disclosures that promote more informed investment, credit, and insurance underwriting decisions and, in turn, enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system project team, led by the Sustainability Transformation team and complemented by experts from Enterprise Risk Management, Communications, Operations, Environmental Safety and Health Affairs (ESHA), and Procurement. In 2022, the TCFDTCFDThe Task Force on Climate-related Financial Disclosures (TCFD) was created by the Financial Stability Board to improve and increase reporting of climate-related financial information. The Task Force developed recommendations for more effective climate-related disclosures that promote more informed investment, credit, and insurance underwriting decisions and, in turn, enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system-specific project team involved an external consultant to take the next step in risk and opportunity assessment and conducted a workshop to identify relevant climate-related risks and opportunities. This enhanced risk and opportunity (R&O) assessment comprises a physical risk analysis of the company’s sites (see Figure 020), sales, and sourcing regions. The risk analysis of Clariant sites was prepared using the »Climate Change Edition« of the »Location Risk Intelligence« software from reinsurer Munich Re. It is based on the RCP scenarios for atmospheric greenhouse gas concentrations from the latest IPCC Assessment Report (IPCC AR5, 2014). In up to three climate scenarios (RCP 2.6, RCP 4.5, and RCP 8.5) and time horizons (2030, 2050, 2100), the tool analyses site-specific hazard exposure for various acute and chronical hazards, such as sea level rise and wildfires.
For the risk analysis of Clariant’s sales and sourcing regions, regional information from the IPCC’s Interactive World Atlas was used to identify physical hazards. This allows to identify which sales and sourcing regions are in danger and could impact the company’s supply chain reliability. For both sales and sourcing regions, the analysis identified mean temperature changes, maximum temperature increase, and heavy precipitation as the main risks.
3. b. Describe the organization’s processes for managing climate-related risks
In Clariant’s risk assessment process, the risk analysis was enhanced by an impact assessment where risk consequences were classified in terms of financial impact. Based on the estimated financial impact, Clariant qualitatively assessed the materiality of identified climate-related risks and opportunities. The TCFDTCFDThe Task Force on Climate-related Financial Disclosures (TCFD) was created by the Financial Stability Board to improve and increase reporting of climate-related financial information. The Task Force developed recommendations for more effective climate-related disclosures that promote more informed investment, credit, and insurance underwriting decisions and, in turn, enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system analysis in 2023 will include financial exposure estimates in alignment with the company’s risk assessment process.
3. c. Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management
The responsible entity for Clariant’s ERM and risk assessment process has been continuously involved in the climate-risk and opportunity assessment to ensure that concepts and processes are aligned where possible. For example, a financial impact classification similar to the ERM process has been applied. Clariant will assess how to integrate the continuous management of climate change-related risks and opportunities in future.
4. a. Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process
Clariant’s climate-related metrics and targets are available in the chapter »Environmental protection and resource efficiency« as well as in »Climate protection« in the CDP Questionnaire, and on the company’s website.
4. c. Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets
Since the 2021 financial year, Clariant’s emission reductions have been part of short-term and long-term incentive remuneration. Scope 1 & 2 emission targets are part of the CLIP (Clariant Long-Term Incentive Plan) for members of the Executive CommitteeExecutive CommitteeUntil 30 June 2022, the Executive Committee was mainly responsible for implementing and monitoring the Group strategy, for the financial and operational management of the Group, and for the efficiency of the Group’s structure and organization. Effective 1 July 2022, the Executive Committee was replaced by the Executive Steering Committee (ESC). and Global Management. Scope 3 emission targets are part of the Management Level employees’ incentive plan. To reduce climate-related risks in the future, Clariant introduced a carbon pricing scheme for all major capital expenditures that applies a monetary value on greenhouse gas emissions. Read more in Sustainability Targets