Identified non-financial risks

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.

Environmental risk

The Group treats environmental risk in a multidimensional manner and strives to identify the full range of potential negative effects of its activities on the environment. The analyses are used to plan and take actions to mitigate risks and minimize negative impacts, and the entire process is part of the sustainable management of the Group companies.

All operations related to the core business of the Śnieżka Group may have a negative impact on the environment, including:

  • collection and processing of raw materials,
  • production,
  • storage and transport of products.

These issues particularly concern the Group’s value chain (scope 3), including the footprint related to the sourcing of raw materials and packaging by suppliers.

The Group identifies the following risks related to potential negative impact on the environment:

  • significantly increased fees for using the environment,
  • penalties for non-compliance with regulations,
  • suspension of production activities,
  • resignation of users and consumers from purchasing products that have a negative impact on the natural environment.

In addition, within the meaning of the provisions of Regulation 2020/852 of 18 June 2020 on the establishment of a framework to facilitate sustainable investments (the so-called Taxonomy), part of the Group’s activities do not comply with the nature of environmentally sustainable activities (item 10.3.2. of the Report).

Some activities in the Group’s value chain feature high carbon intensity. This applies, for example, to the production of packaging from petroleum products or the acquisition of some raw materials. Therefore, the Group identifies the risk of impact on the business model and the results of future European Union regulations – they may limit the permissible emission and energy consumption of production plants in the EU. In order to prevent the materialization of this risk, the Group has adopted the obligations described in the Śnieżka Group’s 2023+ Sustainable Development Strategy, the Śnieżka Group’s climate policy, and the Śnieżka Group’s quality, environment and health and safety policy.

Environmental and climatic aspects are monitored on a regular basis and managed in a responsible manner in the Śnieżka Group. Due diligence in this area is maintained, inter alia: by implementing its own good practices related to environmental protection and limiting the impact of its activities on the climate.

Due diligence of the Śnieżka Group in the area of environment:

  • good practices and responsible management principles,
  • monitoring the implementation of obligations towards the environment, natural resources and climate together with regular review of job responsibilities for environmental issues,
  • strict compliance with regulations on environmental protection and combating climate change,
    including – where possible – implementation of solutions that also live up to the standards of the planned regulations,
  • compliance with permissible emission levels (including VOCs) and protection of water and land,
  • building ecological awareness among employees through responsible waste management, including hazardous waste,
  • environmentally responsible selection of raw materials, as well as their strict control at the stages of developing new recipes and during production,
  • analysis of recipes in terms of the possibility of using raw materials with a lower impact on the environment,
  • control of the impact of interior and exterior products; the following is subject to analysis: emissions and impact on the environment and health,
  • safe storage of finished products,
  • preventing failures and the related negative impacts on the environment – the Failure Prevention Program was implemented at the production plant in Brzeźnica and the Logistics Centre in Zawada belonging to FFiL Śnieżka SA.

New investments within the Śnieżka Group also contribute to reducing the negative impact on the environment, an example of which is the Logistics Centre commissioned in 2022. Modern, energy-saving technologies allow to optimize the transport and logistics of the Group’s products. The implementation of ecological solutions is also possible owing to the work of the Group’s Research and Development Centre – more information on this subject can be found in the Report in item 10.3.4.4.

The Śnieżka Group also has insurance policies, including those against natural disasters (e.g. floods, wind, rain, hail, snow or ice pressure, lightning strikes, earthquakes, landslides and subsidence).

In addition, in 2023, the Śnieżka Group reduced the carbon footprint of the parent company, FFiL Śnieżka SA. Detailed data on emissions in scopes 1, 2 and 3 can be found in the Report in item 10.3.3.1.

Risk related to the standardization of environmental management standards

The Śnieżka Group’s objective is to adopt uniform environmental management standards in all Group companies. Individual entities strive to adopt the same internal regulations, including: in the area of:

  • occupational health and safety,
  • evaluation and classification of raw materials.

The challenge in this area is the differences in the development of the Group’s individual markets and the national regulations applicable in these markets.

Risk associated with demographic changes

The Śnieżka Group is aware of the demographic challenges in the countries where it operates.

According to the Central Statistical Office’s forecasts1 the population aging process is to continue in Poland, which means:

  • an increase in the percentage of people aged 65 and over,
  • a large decline in the number of children and adolescents.

The working-age population will also shrink. Eurostat data2 shows that in Poland between 2013 and 2023 there was the largest increase in the percentage of the population aged 65+ in the EU (5.5%). The progressive aging of the population and the decline in the number of people of productive age is also noticeable in Hungary, where, according to Eurostat data, in the years 2013-2023 the percentage of the population aged 65+ increased by 3.3%. In Hungary, as across the EU, European statisticians expect the share of older people in the total population to increase significantly in the coming decades. The demographic situation in Ukraine is obviously influenced by the war with the Russian Federation since 2022. According to the publications of the Institute of Central Europe3 the number of working-age people shrank from 17.4 million in 2021 to 11.9 million at the beginning of 2023. This represents a decline of almost 32 percent.

In the Śnieżka Group, the processes of analysing employment and employee availability are carried out in a long-term perspective. Its activities in the area of HR – also in relation to multi-generational teams – are carried out in accordance with the HR Policy and the obligations included in the Śnieżka 2023+ Sustainable Development Strategy, which include the following:

  • maintaining a low level of employee turnover,
  • development opportunities,
  • building employee commitment and satisfaction,
  • a diverse and inclusive work environment.

Risk connected with limited availability of highly-qualified staff and talent attraction and retention

In 2023, the Śnieżka Group recorded a deficit of candidates with the sought-after competences in all key companies conducting recruitment – both in specialist and line positions. In the Group’s opinion, the competitiveness of the specialist labour market is caused by:

  • increasing importance of remote work,
  • expected employment flexibility.

This issue also has an impact on the ability to retain qualified staff in the organization.

The Group minimizes the risk of limited availability of qualified employees by implementing a positive and credible employer image. In accordance with the Śnieżka 2023+ Sustainable Development Strategy, all employees of the Group can count on working in an organization strongly rooted in values, systematically managing employee commitment and satisfaction.  To ensure their satisfaction, development talks in key companies are conducted at all levels of the organization (process implemented in Śnieżka SA and Śnieżka ToC, implemented in other foreign companies of the Group).

One of the key areas of the HR strategy implemented by the Śnieżka Group is the identification of appropriate qualifications and care for the employees who have them.. The Group makes sure so that its organizational culture and the best employee experience are present at every stage of their presence in the organization – from recruitment, through the offer of development and support for everyday work, to development talks. The Group’s ambition is to enable all employees to fully use their potential, including diverse experiences and points of view.

Risk related to a decrease in employee motivation and involvement

Standardization of business processes in Śnieżka Group’s subsidiaries accounts for changes in their methods of operation in numerous areas. The Group is aware that as for some employees, these changes may involve the risk of decreased motivation, commitment and effectiveness, and consequently – resignation from work. It increases in the case of incorrect, non-transparent information policy related to the implemented changes. To minimize the risk, the Group has implemented special rules for cascading key information. The role of subordinates was also strengthened, highlighting the need to provide appropriate and understandable justification of the changes introduced.

The Śnieżka Group also identifies potential reasons for the decline in employee motivation and commitment. The most important ones included:

  • high dynamics of changes and the need for quick adaptation,
  • weakening social bonds caused by working in dispersed teams,
  • decreased sense of belonging to the team and company,
  • the need to be rewarded and appreciated.

In order to mitigate these factors as much as possible, Śnieżka pays attention to issues that ensure a sense of security and appreciation, high evaluation by superiors and satisfaction with the workplace. It also conducts a personnel policy whose aim is to meet, to the greatest possible extent, not only financial expectations, but also those regarding development opportunities. All these activities are aimed at building a culture of high commitment, which is perceived as one of the crucial elements of the human resources management strategy.

1 Central Statistical Office, Population forecast for 2023-2060, https://stat.gov.pl/obszary-tematyczne/ludnosc/prognoza-ludnosci/prognoza-ludnosci-na-lata-2023-2060,11,1.html ( access: February 26, 2024).
2 Eurostat. Statistics Explained, Population structure and aging,
https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Population_structure_and_ageing (accessed: February 26, 2024).

3 H. Bazhenova, Demographic challenges of Ukraine, https://ies.lublin.pl/komentarze/demacyjne-wyzwonia-ukrainy/#:~:text=Against this background, quite realistic, pessimistic estimates quote the number of approximately https://ies.lublin .pl/komentarze/demografia-wyzwonia-ukrainy/ (accessed: February 26, 2024).

The Śnieżka Group identifies potential risks of human rights violations related to working conditions, including the time and circumstances of performing professional activities. The Group effectively prevents risk by strictly following detailed procedures described in the Work Regulations applicable in the Group companies.

The Group pays special attention to occupational health and safety issues. All companies have implemented precise occupational health and safety procedures that comply with the law and the specificity of individual plants. Their compliance is strictly required and monitored.

More information about this can be found in the Report in item 10.4.2.

Risk related to the possibility of occurring corruption events

The Śnieżka Group effectively counteracts the risk of corruption. This issue is precisely regulated in the Anti-Corruption Policy (described in more detail in the Report in item 10.5.1.3.). The document provisions were communicated to all employees of the Group. Each employee also has the opportunity to anonymously or by name report violations of law, procedures and ethical standards. These issues were the subject of training and were described in the materials handed out to employees.

Risk associated with potential cases of discrimination and mobbing

The Śnieżka Group counteracts the risk of incidents of mobbing or discrimination through a developed and implemented mobbing prevention procedure. The Group’s parent company, FFiL Śnieżka SA, has established an Anti-Mobbing Committee, and the Company organizes anti-mobbing and anti-discrimination training for employees. More information about counteracting mobbing, along with a description of the applied Policy, can be found in the Report in item 10.4.1.1.

Risks associated with the increasing customer requirements

The Śnieżka Group monitors customer expectations in terms of quality, parameters and the impact of products on the environment.The Group observes the trend of growing consumer awareness and increasing expectations, and at the same time the risk of increasing these expectations in some aspects, more than any modern technologies could mitigate.

The Group’s response to these challenges is:

  • implementation of an internal knowledge sharing system for people responsible for production technology,
  • constant dialogue with suppliers about potential solutions and product innovations,
  • innovative methods of developing and testing new products,
  • implementing products with low impact on the environment and the user,
  • obtaining certificates confirming these properties.

More information about this can be found in the Report in item 10.3.4.4.

Risk associated with decreasing interest in high-emission products and products generating a large amount of waste

Issues of growing social awareness were also identified in the Śnieżka Group in the process of simplified materiality analysis assessing the financial effects of risks and the likelihood of their occurrence.   The analysis allowed for the isolation of two risks occurring at a lower level of the value chain:

  • the risk of decreased interest of consumers and customers in high-emission products is mitigated by the Group by reducing the carbon footprint – in 2023 this footprint was reduced in FFiL Śnieżka SA (more information on this subject can be found in the Report in item 10.3.3.1.),
  • the risk of reducing demand for products generating a large amount of waste is minimized by the Group by, on the one hand, minimizing production waste and, on the other hand, offering products on the market in packaging with an increasing share of recycled raw materials (more information on this subject can be found in the Report in items 10.3.3.4 and 10.3.3.6.).

Risk associated with potential breaches of ethics in the supply chain

The Śnieżka Group is aware that (through image-related connections) ethical violations in the supply chain may affect the reputation of the Group itself. Therefore, to minimize this risk, the Group verifies the ethical standards of its suppliers. An essential action in this regard is the implementation of the Supplier Code in 2022 along with the Supplier Self-Assessment Questionnaire (more information on this subject can be found in the Report in item 10.3.5.)

Dostawcy wraz z Kwestionariuszem samooceny dostawców (więcej informacji na ten temat znajduje się w Sprawozdaniu w punkcie 10.3.5.)

Supply chain issues were also subject to materiality analysis. Two risks identified during the analysis are related to the Group’s directional decision to verify suppliers in terms of ESG and cooperate with enterprises that care about sustainable development. The Group is aware that this decision – at a higher level of the value chain – generates the risk of higher costs of doing business, as the offer of suppliers complying with ESG standards may naturally be higher in price than the offer of companies developing in an unsustainable way. This issue is also related to the risk revealed in the materiality analysis at a lower level of the value chain, i.e. breaking business relationships resulting from the supplier’s failure to maintain appropriate sustainable development standards. The Group is aware of this risk and treats it as an integral part of its decisions to cooperate only with companies that share its values and awareness of the need to develop in a sustainable manner.

The paint and varnish industry is obliged to operate in line with applicable regulations. Regulations introduced by national and EU institutions tend to constantly tighten requirements and, at the same time, are becoming more and more complex. This applies in particular to Śnieżka Group products certified as ecological products. The Group is aware that in some aspects it is difficult to reconcile legal requirements with the functional features of products expected by consumers. An example of such a situation may be the issue of biocides – the regulations regarding them are becoming more and more stringent, and at the same time, without these agents, ecological paints would quickly lose their properties due to natural decomposition processes.

The Group mitigates the risk related to new regulations by:

  • constant and comprehensive monitoring of legal changes that may affect production,
  • research and development work enabling the adaptation of technological process to dynamic updates of regulations.

Risks related to crisis communication management

The Śnieżka Group is aware that the scale and complexity of its operations involve the risk of events requiring crisis communication.An interdisciplinary Rapid Response Team operates within the Group whose tasks include anti-crisis management related to reputation. This effectively minimizes the risk in the area of crisis communication management.

Risk associated with marketing communication

Conducting marketing communication entails the risk of developing inconsistent content with the communication standards of the Śnieżka Group and, consequently, damage to the image of the organization. In order to minimize such events, all advertising campaigns of the Śnieżka Group are verified at the planning stage and checked for consistency and compliance with internal guidelines developed on the basis of the Code of Ethics in Advertising. The Group has developed principles for approving marketing messages and a procedure for dealing with possible violations.