CLIMATE CHANGE-RELATED RISKS AND OPPORTUNITIES

CLIMATE CHANGE-RELATED RISKS AND OPPORTUNITIES

The company has defined its climate-related risks and opportunities according to the recommendations of Task Force on Climate-Related Financial Disclosures (TCFD). In 2022, the risks and opportunities were reassessed.

In December 2022, the Quality and Sustainability Department organized a dedicated crossfunctional workshop on climate change-related business risks and opportunities.

The aim of the workshop was to identify top three climate risks for Nokian Tyres in each of the risk groups: physical, regulatory, market, technology and reputational risks. This was conducted along the recommendations of Task Force on Climate-Related Financial Disclosures. The workshop was facilitated by environmental experts. Risks and examples defined are reassessed annually.

Nokian Tyres is also committed to setting Science Based Targets in order to further reduce greenhouse gas emissions. In May 2020, these SBT’s were officially approved.

CLIMATE-RELATED RISKS

Risk group
Sub category
Examples of concrete risks
Time horizon
Financial impact
Adaptation / mitigation plan
Regulatory Emerging regulation Deforestation-related regulation, mostly concerning natural rubber Medium Medium Follow-up of emerging regulation
Green regulation on aviation and maritime fuels can significantly increase costs of logistics Long Medium
Further environmental fees Additional taxes and duties e.g. EU’s CBAM for fossil raw materials can increase prices. Certification costs Short Medium Participation in industry sector working groups
Stricter expectations to oversight Increased verification testing of products and emission measurements Short Low Follow-up of emerging regulations
Physical Extreme weather events Disruptions in logistics and force majeure situations Short Medium Alternative transportation routes
Extreme weather events Permanent changes in logistics and/or increased force majeure situations Long High Alternative transportation routes
Extreme weather events Impact of extreme weather events on natural rubber producers Medium Low Alternative sourcing locations
Extreme temperatures Contamination/lower quality of raw materials Short Low Multiple supply sources
Technological Climate-related demands for new tire technology A+ rolling resistance tires required for Evs Medium Low Anticipation of future expectations in R&D development road maps
150 km/h max speed for EU – demand for UHP (Ultra High Performance) tires falls Long Medium
Market and reputation Market changes Shift from car ownership to mobility-as-a-service i.e. changing customer base Long Medium Update product and service offering
Tire raw materials Increase use of expensive renewable materials Medium High Road map for selective use of renewable and recyclable raw materials
Energy Green energy prices go up due to strong demand Short Medium Long term power purchasing agreements
Energy Raw material price increases due to higher energy prices Short Medium Long term contracts
Tire raw materials Availability of renewable and recycled raw materials can limit plans for sustainability Medium Low Aiming for multiple sources
Tire demand Increased demand for all-season tires and less winter tires Short Low Update product offering
Reputational risk Deforestation scandals (natural rubber) Medium Low Co-operation with supply chain in line with GPSNR recommendations

CLIMATE-RELATED OPPORTUNITIES

Opportunity group Sub category Examples of concrete opportunities Time horizon Financial impact Implementation plan
Innovation Raw materials Innovations with renewable / recycled / local materials Medium Medium Material development road map to reach 50% share of renewable or recycled raw materials by 2030
Recycling Co-operation with innovative recycling companies.  Medium Medium Screening of opportunities and widening of cooperation
Climate-friendly technology Lower rolling resistance products. Climate-friendly production Short High Product development road map. New zero CO2 factory to Romania being implemented
Energy-efficient production Modern machinery used in Nokian Tyres’ factories Short Medium New zero CO2 factory to Romania being implemented
Product range Competitive advantage Nokian Tyres is an expert in demanding and challenging weather conditions. We have a strong share in winter tire markets and are prepared to increase the share further, should the extreme weather phenomena increase in the future. Short Medium Developing product portfolio, increasing consumer awareness
Competitive advantage Increase of all-season tire sales in Europe due to milder winters Medium Medium Developing product portfolio
EU further green regulation Increased focus on sustainable natural rubber  Long Low Co-operation within GPSNR
EU further green regulation Tire regulation for wear resistance (abrasion) Medium Medium Product development
Industrial (heavy) tires We have existing expertise to provide climate-friendly solutions, e.g. intelligent sensor technology Short Medium Product development
Engagement Consumers Increase awareness of how tires can affect safety and carbon footprint Short Medium Consumer education through communications and marketing
Policy makers Increased preparedness for new regulations or incentives Long High Industry-wide cooperation and information sharing with decision makers
Shareholders / stakeholders Green / sustainable financing Short High Transparent sustainability targets, public reporting, collaboration with financial institutions, information sharing with stakeholders
Regulatory Renewable Energy Directive and other green regulation More renewable energy available in EU, prices can decrease Long Low Own investments/partnering for green energy
Global carbon tax or similar would improve the company’s competitive position Long Low Further improvement of corporate carbon footprint