The analysis of the risks related to the impact of the Śnieżka Group on the environment and climate and the impact of climate change on the Group was the starting point for work on the Climate Policy and the Śnieżka 2023+ Sustainable Development Strategy. TCFD Guidelines (Task Force on Climate-related Financial Disclosures) and the analysis of emissions within scopes 1 and 2 developed based on the GHG Protocol were used in the above-mentioned process. The Group analysed both physical and transition risks.
- Physical risks: financial costs and losses resulting from the increasing severity and frequency of physical factors contributing to climate risk, i.e. the impact of extreme weather events (e.g. floods, sea level rise, droughts, fires, heat waves and storms, etc.) leading to e.g. damage to infrastructure, crops, disturbances in the supply chain.
- Transition risks – related to the transformation to a low-emission economy, including: with current and future regulatory, technological and market changes (disturbances in the current structure of demand and supply of electricity, natural raw materials, products and services rendered), as well as changes in market trends, including consumer attitudes and behaviour.
The risks that were deemed to have the highest potential impact and likelihood level were:
- acute physical risk resulting from specific events, in particular weather-related, such as storms, floods, fires or heat waves, which can cause damage and disrupt value chains.
- long-term physical risks arising from long-term climate change, such as temperature changes, rising sea levels, reduced water availability, biodiversity loss, and changes in land and soil productivity;
- policy risks, e.g. arising from energy efficiency requirements, carbon pricing mechanisms that drive up fossil fuel prices, or policies that support sustainable land management.
- market risk, e.g. risk of litigation due to failure to avoid or mitigate adverse climate impacts or failure to adapt to climate change.
Climate risks were also identified as part of the simplified materiality analysis process of the Śnieżka Group, during which the financial effects of the risks and the probability of their occurrence were subject to assessment. The Group identified both physical and transition risks – in addition to assessing the probability and financial scale, the analysis also determined the place in the value chain for each of the risks (more information in this respect can be found in the Report in item 10.6.2.).
Heat and frost waves and their impact on the Group’s own operations were classified as physical risks. The materialization of risk would mean for the Śnieżka Group the need to adapt recipes and methods of storing products to new weather conditions and to increase expenditure related to maintaining optimal working conditions, including: installation of air conditioning and heating devices or ensuring the appropriate level of hydration of employees. During the simplified materiality analysis, the Group also considered a temporary reduction in production due to limited water availability as a physical risk in its own operations.
This limitation may be caused by the so-called hydrological drought, i.e. a situation in which, as a result of atmospheric drought, river flows fall below long-term average values and local water resources are significantly depleted.
Transition risks identified in the dual materiality process include: increase in fuel prices. This risk is related to the entire value chain of the Śnieżka Group – higher fuel prices would mean for the Group both an increase in the costs of supplying raw materials necessary for production and higher costs of distributing its products to business partners. At a lower level of the value chain, the Group has also defined climate transition risk in the form of the need to calculate the carbon footprint of products. The Group intends to start work in this area in 2024-2025.