As a global player, Sika is exposed to a variety of risks. Ensuring the Group’s freedom of action, safeguarding its reputation, and protecting the capital invested in Sika requires the timely analysis of potential risks and their integration into strategic decision-making processes. Sika also recognizes that climate change will have an impact on the world it is operating in, and it therefore needs to be addressed in the risk management process and the strategic planning.
Risk Governance
Risk Governance and Risk Management Framework
The Board of Directors (BoD) is Sika’s highest governing body and is responsible for the assessment of risk management. Its duties include the annual re-assessment of the risk situation at Group level. All risks, namely both financial and non- financial ones, are assessed based on the following key questions:
Does the risk persist on a global or regional level?
What implications does the risk have for the Group?
What is the probability of losses occurring?
What measures need to be implemented to prevent the risk or mitigate its consequences?
If a risk is rated critical in the overall assessment, effective measures are then taken to reduce the probability, prevent its occurrence, or limit its implications. Sika pursues a risk-based management approach for Group-wide risks and along the entire value chain, from procurement and production to marketing and sales.
The BoD is also the highest governance level of climate-related risks and opportunities. It is responsible for reviewing and endorsing the development and implementation of sustainability policies and strategies and the Chair of the Board steers and oversees climate-related topics by receiving regular updates from the Group Management. The Chair of the Board is permanently invited to add climate-related topics to the agenda of the Chief Executive Officer (CEO) and the BoD. The Board of Directors has approved the Group’s climate ambition to reduce scope 1 and 2 CO2 emissions by 50% until 2030 and to achieve net-zero greenhouse gas emissions by 2050.
In December 2021, the Board of Directors decided to install a Sustainability Committee consisting of four Board members with expertise in different areas of ESG. The group will prepare sustainability-related topics for discussion and decision-making in the Board. The Sustainability Committee will focus on the following areas: assure a formal ESG risk and opportunity assessment, including the materiality analysis; ensure measurable goals which are aligned with the strategy; assure the proper organization and allocation of resources; and assure appropriate reporting and stakeholder communication. The Sustainability Committee plans to meet at least two to three times per year with the first meeting taking place in February 2022. After each meeting, a report will be issued to the full BoD.
Group Management regularly reviews the processes underlying risk management, and it is responsible for the development and implementation of initiatives and actions addressing risks in line with the defined sustainability strategy and targets. Group Management is responsible for risk management at the highest executive level and gives regular updates to the Board. Risk management (incl. climate change-related risks) falls under the domain of the Corporate Finance department, headed by the CFO. Regarding Mergers & Acquisitions (M&A), those reviews and consultations take place as part of the due diligence process.
Sika has a comprehensive risk management system structured at Group level and effective for all its subsidiaries. Risks are identified at an early stage and integrated into strategic decision-making processes. Risk management assists in the identification of new opportunities and thereby helps to generate added value to the business performance. Sika’s Risk Management Framework is in line with the Enterprise Risk Management (ERM) framework, and it provides reasonable assurance that business objectives can be achieved and obligations to customers, shareholders, employees, and society can be met. Identification, assessment, and management of climate-related risks are integrated into the ERM framework since unexpected environmental, climate-related disasters, and economy fluctuation might have an impact on global and local markets. Locally, climate-related risks are assessed and evaluated by EHS and Operations Managers in collaborationwith Regional Operations Managers and General Managers (GMs). GMs consolidate all risks falling under their domain and report to Area Managers who in turn report to Regional Managers. All Regional Managers are part of the Sika Group Management. The information is consolidated at corporate level and aligned with the overall strategy.
TCFD Recommendations
Evaluating climate-related risks and opportunities related to its business and developing appropriate response measures, as required by the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, are of vital importance to ensure long-term sustainable performance and the business continuity of Sika. The following “TCFD Mapping Table” shows the sections of the Annual Report 2021 in which the relevant information can be found. In accordance with the recommendations of the TCFD, the table is divided into the four areas of governance, strategy, risk management, key figures and targets, as well as the eleven recommended disclosures.
TCFD Mapping Table
Disclose the organization’s governance around climate-related risks and opportunities.
| Recommended Disclosures | Sections in Annual Report 2021 |
|---|---|
| a) Describe the board’s oversight of climate-related risks and opportunities | Risk Management and TCFD Recommendations chapter, p.24-25 |
| b) Describe management’s role in assessing and managing climate-related risks and opportunities | Risk Management and TCFD Recommendations chapter, p.25 |
Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material.
| Recommended Disclosures | Sections in Annual Report 2021 |
|---|---|
| a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term | Risk Management and TCFD Recommendations chapter, p.28, 36-44 |
| b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning | Risk Management and TCFD Recommendations chapter, p.32 Sustainability Report 2021, Products chapter, p.127-137 |
| c) Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario | Risk Management and TCFD Recommendations chapter, p.33-36 |
Disclose how the organization identifies, assesses, and manages climate-related risks.
| Recommended Disclosures | Sections in Annual Report 2021 |
|---|---|
| a) Describe the organization’s processes for identifying and assessing climate-related risks | Risk Management and TCFD Recommendations chapter, p.25-26 Sustainability Report 2021, Suppliers chapter, p.98-101, Planet chapter, p.111-113, 118-126 |
| b) Describe the organization’s processes for managing climate-related risks | Risk Management and TCFD Recommendations chapter, p.24-26 |
| c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management | Risk Management and TCFD Recommendations chapter, p.26, 28 |
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.
| Recommended Disclosures | Sections in Annual Report 2021 |
|---|---|
| a) Disclose the metrics used by the organization to assess climate related risks and opportunities in line with its strategy and risk management process | Risk Management and TCFD Recommendations chapter, p.24 Sustainability Report 2021, Strategic Foundation chapter, p.59-60 |
| b) Disclose scope 1, scope 2, and, if appropriate, scope 3 greenhouse gas (GHG) emissions, and the related risks | Sustainability Report 2021, Planet chapter, p.121-124 |
| c) Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets | Sustainability Report 2021, Strategic Foundation chapter, p.59-60 Compensation Report 2021, p.174-175
|
(1) In the TCFD publication Guidance on Metrics, Targets, and Transition Plan (available at https://assets.bbhub.io/company/sites/60/2021/07/2021-Metrics_Targets_ Guidance-1.pdf) the Task Force has identified seven categories of climate-related metrics from the eleven recommended disclosures and guidance for all sectors that all organizations should disclose, recognizing that for some categories, implementation may take time as data and methodologies evolve. These categories are: GHG Emissions, Transition Risks, Physical Risks, Climate-related Opportunities, Capital Deployment, Internal Carbon Prices, and Remuneration. For this year, Sika has decided not to further develop the "Metrics & Targets" table published in 2020 and instead refers to those sections of the Annual Report 2021 which fully or partially cover five of the seven categories identified by the Task Force: GHG Emissions, Transition Risks, Physical Risks, Climate-related Opportunities, and Remuneration.