Taskforce on Climate-related Financial Disclosures (TCFD)
The TCFD recommendations are a set of voluntary, climate-related financial disclosures for use by companies to provide information to their stakeholders. We were among the first companies to commit to implementing, as fully as practicable, these recommendations as outlined in the TCFD’s implementation path. The recommendations are structured around four elements — Governance, Strategy, Risk Management, and Metrics and Targets. This Report includes various disclosures relevant for the TCFD recommendations. To highlight this, for each TCFD theme reference is made to relevant sections.
Governance
Sustainability, including climate-related risks & opportunities, is a direct responsibility of the Managing Board. The Managing Board is supported in this by advice from our external Sustainability Advisory Board and reports on progress to the Supervisory Board, via its Sustainability Committee.
Our approach toward assessing and managing climate-related risks and opportunities is steered by our climate action agenda, containing key actions and deliverables that are owned by members of the Managing Board and Executive Committee. The Responsible Care Plan and our greenhouse gas (GHG) reduction program translate the climate action agenda into concrete operational programs managed by Operations & Responsible Care, Sourcing and business management. All of these are regularly discussed and reviewed during the MB/EC meetings.
Strategy
DSM has recognized climate change as a global megatrend for more than a decade. A changing climate, and related adaptation and mitigation efforts, will impact our company directly on our operations and indirectly, via shifts in our value chains and end-markets. This poses a risk to some of our current business while providing ample opportunities for growth.
Our portfolio and innovations seek to offer solutions to address changes coming from the shift to a low-carbon society. For example, we address transition risks through innovations such as methane-reducing ruminant solution Bovaer® and plant-based proteins such as CanolaPRO®, as well as bio-based Dyneema®, which has a reduced carbon footprint through switching to a bio-based raw material.
We are reducing our exposure to transition risks like carbon pricing and changing legislation through actively reducing GHG emissions from our own operations and in our value chain. Projects to underpin our Science Based Targets and ‘net zero by 2050’ commitment are ongoing.
We believe that the implementation of our business strategy and delivery upon our GHG targets are an integral part of our resilience toward transition risks. We are piloting an approach to transition risk assessments against three scenarios to further stress-test this resilience.
We conducted an initial mapping of the exposure of our top 30 sites to test our physical resilience. The assessment was based on three scenarios (in line with our transition risk approach), two time horizons and five hazards. Further validation with the sites in question is underway and the assessment is currently also expanded to our value chain.
Risk Management
Climate-related risks are integrated into our regular risk management practices. As such, climate-related risks were identified both in top-down Corporate Risk Assessment process and the bottom up Letter of Representation process.
The outcome of these processes was climate-related risks being reported as ‘Emerging risk 2’ (Physical climate risks) and ‘Emerging risk 3’ (Transition climate risks). Several mitigating actions are coordinated at company level, such as the GHG reduction program and the CO2REDUCE supplier engagement program, where others remain the responsibility of the units.
To further standardize and improve our risk assessments, the approach of using multiple scenarios for physical and transition climate-risk assessments will be rolled out across the company. This will enable us to improve our disclosure of climate-related risk exposure and the relevant mitigating activities.
Targets and Metrics
We report our climate-related metrics and targets via this Report and the company website. Our Science Based Targets (SBT) are our key environmental targets within the Responsible Care Plan, supported by supplementary targets and programs. These targets are also the foundation toward our ‘net zero by 2050’ goal. Furthermore, we also report on avoided emissions, water, waste and other emissions.
We apply a carbon price of €50/t CO2eq in our large investment decisions and in the Profit & Loss statements of the business groups for internal management reporting. We require all business growth projects to be carbon neutral, or else compensated for in the same business.
Climate-related metrics form part of the Long-Term Incentives of the Managing Board and executives.
