Governance
Datwyler’s organizational structure is based on a clear delineation of tasks, competencies and responsibilities. The governance of sustainability – and climate-related issues in particular – are all integrated into the corporate governance structure throughout the Group and into all strategic tasks.
The Board of Directors has overall responsibility for Datwyler's ESG strategy and reporting and oversees the executive management. As an integral part of the annual report, the sustainability report with Datwyler's climate targets is submitted to the Board of Directors for review and approval. Specific climate-related topics can be discussed at any of the Board meetings.
While Datwyler's Board of Directors is responsible for oversight, the Datwyler Executive Team ensures the implementation of the Sustainability Strategy, including climate-related issues. The CEO oversees the climate strategy development, implementation, and the annual risk assessment. Therefore, he manages the annual budgets for climate mitigation activities, providing climate-related employee incentives as well as monitoring the progress against climate-related corporate targets: In 2020, the CEO instigated the companies 2030 climate-neutral (scope 1 & 2) target and has defined and overseen the roadmap towards achieving the target.
The CEO is supported by the Chief Sustainability Officer. The CEO and CSO hold weekly meetings to discuss ESG-related topics, and as part of this, climate-related issues.
The Chief Sustainability Officer, as a new function in Executive Management established in 2022, is responsible for the coordination and implementation of all sustainability activities. Specifically, she manages the development and implementation of the climate transition plan as well as the integration of climate-related issues into the strategy. The CSO also evaluates the proposals for new key results that can be submitted by everyone in the organization.
For the business integration, the CSO is supported by the sustainability focus team and Datwyler’s global Sustainability Manager, who coordinates the sustainability management across all plants and is supported by a dedicated EHS officer at each individual plant. Specific climate-related responsibilities of the Sustainability Manager lie in assessing climate-related risks and opportunities, monitoring progress against climate-related corporate targets, and managing the value chain engagement on climate-related issues.
More detailed information on the focus team and the business integration can be found in the Sustainability report.
In order to promote awareness of the sustainability focus areas, the Board of Directors has decided to add a sustainability indicator to the variable incentive model. Sustainability measurement parameters account for 20% and are applied for members of the Executive Management and for all eligible employees since 2022 onward. In alignment with the overall strategy of sustainable profitable growth, the variable incentive is measured based on three performance indicators with different weightings. Within the sustainability parameter, GHG reduction accounts for 50%. By taking this climate-related parameter into account, Datwyler motivates employees to reach Datwyler’s climate target for its operations: climate-neutral operations by 2030.
Strategy
Climate transition plan
Datwyler has a climate transition plan which includes the analysis and handling of climate-related risks and opportunities summarized in this TCFD report as well as the focus on climate-neutral operations 2030, eco-design, resource-friendly production, and sustainable supply chain. Datwyler has set a goal to achieve climate neutrality for its own operations (scope 1 and 2) by 2030. This target is mainly based on the 1.5°C reduction path defined by SBTi, which includes implementing measures to purchase renewable energy, increase energy efficiency, and invest in its own production of renewable energy. These actions are intended to drastically reduce greenhouse gas emissions despite forecasted business growth. Datwyler will engage in beyond-value-chain mitigation for emissions that continue to occur in order to achieve climate neutrality. Datwyler has also quantified the scope 3 emissions, mainly related to buying materials from suppliers for production and to upstream and downstream transportation by third parties.
Datwyler engages regularly with shareholders and investors and uses all existing touchpoints to refer to the ESG strategy and the climate transition plan. By doing so, it collects the feedback and inputs from investors and integrates it – where feasible – into the ESG strategy. The basis for regular dialog with shareholders and investors is the integrated annual and sustainability report. This presents the main features of the ESG strategy and the climate transition plan, and reports on the progress made in implementing them in quantitative and qualitative form.
Climate-related physical and transitory risks
According to TCFD guidelines, a distinction is made between physical risks and transitional risks and opportunities. Physical risks arise from direct climate events and thus have an impact on Datwyler's operating activities. Transitory risks, on the other hand, arise from the decarbonization of the economy or from the resulting legal, social, economic, or technological framework conditions. Datwyler assessed risks and opportunities in both categories and further categorized them into short-term (1-3 years), medium-term (3–10 years) or long-term risks (10–30 years). Furthermore, they were characterized along the value chain and their likelihood to occur. These identified risks are summarized in the table below.
Risk |
Characterization |
Description |
|---|---|---|
Increasing costs |
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Increased indirect (operating) costs: Datwyler needs very specific materials. Because of changing regulations or the disruption of global supply chains, the costs of raw materials could increase, which would pose a financial risk. Furthermore, the availability of raw materials might be limited due to geopolitical circumstances (e.g. synthetic rubber). |
Technology |
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The substitution of existing products and services with lower emissions options might lead to decreased revenues due to reduced demand for products and services. |
Changing temperature |
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With the higher temperatures, the use of cooling water (in the Food & Beverage division’s production) needs more energy and could lead to increased operating costs. Also, water scarcity becomes a climate-related risk for Datwyler’s operations. |
Drought |
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Drought will affect global water security. For Datwyler, water scarcity will specifically pose a risk for the Healthcare production sites, where indirect operating costs might increase. |
Carbon pricing |
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Climate-related regulation that place a price on greenhouse gas emissions generated by Datwyler's production plants are a risk for increased operation costs. |
Strategic elements to respond to climate-related risks on Datwyler’s business
The identified climate-related risks confirm Datwyler’s strategic areas of action and emphasize the importance of further steps.
Regarding the increasing costs of raw materials, the broad and proven supplier base and expertise in Datwyler's procurement teams proved their worth. Datwyler’s Global Procurement Team provides local procurement teams at each plant with global standardized guidelines and supplier management processes. The company also began encouraging suppliers to propose more sustainable materials to replace existing products completely or to be used in new developments. Several suggestions have been received already, and the goal is to identify five product replacements annually by 2030.
To support its eco-design focus topic, Datwyler aims to increase its share of locally sourced materials. After identifying the number of existing local suppliers, packaging materials was selected as a first focus and local sourcing targets were developed. This approach is also being extended to directly sourced raw materials. This strategy will also reduce the company’s supply chain continuity risks.
The transition to electric mobility is a risk to Datwyler's current products, but also a climate-related chance to use our deep understanding of the mobility sector and develop high-quality components for the brake systems of electric vehicles. It also strengthens Datwyler’s commitment to the development of efficient, system-critical sealing technologies. Based on the global ambition for GHG reduction, current trends in the automotive industry are going towards electric mobility, but are still diverse regarding technology concepts used. A wide variety of sealing solutions are required, as there are multiple surfaces that must be sealed effectively. Datwyler has developed several options - from rubber, edge-bond and connector seals, among others – that represent solid alternatives to internal combustion engine applications.
To counter the risk of drought, the production facilities are implementing measures to improve water efficiency. This involves not only using less water in the washing program while maintaining quality and cleanliness, but also defining measures to reuse the waste water.
With Datwyler's GHG reduction plan, the company can reduce potential carbon taxes. The main goal is to reduce greenhouse gas emissions as much as possible by 2030. Ten production sites already cover 100% of their electricity with renewable energy - mostly generated from water, wind, and photovoltaics, provided by their local electricity supplier. Eight production sites produce solar power for their own consumption. In this way, the company is actively supporting the United Nations' climate targets and making itself less dependent on the coal, oil, and nuclear industries.
Climate-related opportunities
Aside the risks, Datwyler also identified climate-related opportunities with a potential substantive financial or strategic impact on its business.
Opportunity |
Characterization |
Description |
|---|---|---|
Access to new markets |
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Through the shift to electric vehicles and mobility, Datwyler is identifying new business opportunities: By offering products and services in electromobility, Datwyler can access new and emerging markets, which might increase revenues. |
Development of new products |
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By developing new innovative products that could reduce the requirement for fossil fuels in the elastomer manufacturing process, Datwyler could access new and emerging markets, resulting in increased revenues. |
Resource efficiency |
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The use of more efficient production and distribution processes could increase operating efficiency with a positive impact on EBIT. |
Strategic elements to strengthen climate-related opportunities on Datwyler’s business
The transformation to electromobility poses an opportunity for Datwyler: Datwyler aims to develop more components and products for the future electric mobility market. Target areas include sealing components for electro-hydraulic brakes, sensors, connectors and housings involving two-component technology and electroactive polymers.
For the development of new products, the already existing principles of Eco-design pose an opportunity. Designing products based on these principles optimizes the environmental performance of the products while maintaining their functional qualities. In addition to saving on materials, reducing process-related waste and using reusable or recyclable packaging and boxes, this approach also helps developers to consider the social benefits and reconsider economic factors at the same time. The area in which Datwyler has the most control over is material development, new materials in particular. Following Eco-design, Datwyler is currently working on a number of projects that could reduce the requirement for fossil fuels in the elastomer manufacturing process.
To achieve climate neutrality by 2030, Datwyler strives to be more efficient and grow revenue without increasing environmental impact. Purchasing renewable energy and the self-generation of electricity will be a main contribution to achieving our goals. Therein lies a great opportunity to reduce utility spend and invest the savings in the research and the development of new materials.
Risk management
Datwyler has firmly integrated climate-related risks into the risk management process for identification and assessment. The Head of Internal Audit is responsible for the Group-wide coordination, while final responsibility in assessing risks lies with the Board of Directors.
As part of an ongoing process to ensure business continuity, risks are continuously identified and assessed throughout the Group. An open exchange is encouraged at all levels of the company and is part of the corporate culture. The management of each function or business area is responsible for significant risks, informing the Executive Management and the Board of Directors of any potential developments and recording its findings in a risk management software.
The CFO of the Datwyler Group and the Head of Internal Audit monitor the risk management process through active exchanges and quarterly meetings with the business areas. Risks are regularly discussed in meetings between the business area management and the Executive Management, ensuring that uniform evaluation approaches are applied and that similar risks are treated equally across the Group business areas. The consolidation of risks and annual reporting to the Board of Directors are carried out by the CFO and Head of Internal Audit.
Datwyler’s institutionalized and systematic risk management system divides risks into four categories: strategic, operational, financial, and compliance. Sustainability risks are translated into one or several of these business risk categories according to their impact at Group level as well as at business unit and production site levels. Datwyler is currently focusing on expanding sustainability risk management with a focus on climate change risks and risks in the supply chain.
Once the individual risks have been identified and assessed, the business area or business unit management is responsible for developing a series of measures to reduce the risk of occurrence and the potential loss. The implementation of these measures is monitored as part of the continuous risk management process and taken into account in the next risk evaluation.
Climate-related risks are assessed and mitigated using the company’s “Business Continuity Planning” (BCP). Datwyler BCP establishes a risk management processes and procedures that aim to prevent interruptions to mission-critical services and re-establish full function to the organization as quickly and smoothly as possible. The BCP process at the production sites includes key ESG risks such as climate change. The process considers various unpredictable events, such as natural disasters, fires, disease outbreaks, cyberattacks, and other external threats. The underlying risk management at the sites is based on ISO 31000 and integrates regular audits.
Metrics and goals
For many years, Datwyler has disclosed comprehensive key metrics and targets on sustainability and GHG emissions as part of its sustainability reporting. Datwyler’s climate-related metrics and targets can be found in the chapter “Environmental” in the Sustainability Report.