TCFD Reporting

Geberit reports on climate-related risks and opportunities according to TCFD guidelines (Task Force on Climate-related Financial Disclosures) for the first time in 2022. The report on governance, strategy, risk management, key figures and goals indicates how Geberit identifies and deals with physical risks and transitional risks and opportunities that are caused by climate change and may have a financial impact on the company.

For Geberit, sustainability means thinking and acting responsibly on a long-term basis and thus being successful over the long term as a result. This means striking a balance between economic, environmental and social aspects in all decision-making processes. Geberit stands for a high level of environmental awareness and has been committed to environmentally friendly, resource-saving production as well as the development of innovative, high-quality water-saving and energy-saving products with outstanding design. Climate change mitigation is also managed with this in mind. Geberit has the strategic goal of making an active contribution towards climate change mitigation and consistently reducing energy consumption and CO₂ emissions – both inside and outside the company.

1. Governance

The responsible and future-oriented corporate governance of Geberit strengthens the resilience of the business model and thus the long-term value creation of the company. As a result, Geberit has taken its responsibility in the field of sustainability seriously for many years and continually improves the holistic management approach towards the most important topics. The Board of Directors has the highest level of direct responsibility for climate-related risks and opportunities. Climate-related topics affect all business areas at Geberit and thus have to be overseen and controlled at the highest level within the organisation.

The Board of Directors determines together with the Group Executive Board the corporate strategy. The sustainability strategy supplements the corporate strategy with twelve concrete modules. Important modules with a connection to climate change mitigation include energy and CO₂ reduction in production and logistics, the development of innovative, sustainable and resource-saving products, the consistent implementation of eco-design principles, and a sustainable supply chain. Intelligent water management both in terms of production and products also plays an important role here. The new CO₂ strategy – which includes an internal CO₂ price and bonus-related component for Group management and employees in Switzerland – was developed by the Group Executive Board in 2021 and was then checked and approved by the Board of Directors. It has been in force since the start of 2022. The Group Executive Board is responsible for implementing the sustainability strategy (including the CO₂ strategy as part of the sustainability strategy). Results and the achievement of objectives are submitted to the Board of Directors for verification at least once annually.

The way in which the topic of sustainability is approached has been further developed within the company on a regular basis. The topic has been addressed actively for over 30 years and has had a dedicated function at the company since 1992, starting with a focus on environmental topics and then constantly growing to include added topics and responsibilities. The central environment and sustainability department has reported directly to the CEO for over 20 years. Since 2020, this department has also been responsible for Group-wide process management and ISO certification and was renamed Sustainability and Process Management. Among other aspects, it coordinates the further development of the sustainability strategy and CO₂ strategy, plus the associated activities. It also develops approaches for identifying, assessing, monitoring and reporting climate-related risks and opportunities. Various relevant environmental data, such as energy and water consumption, is recorded on a monthly basis in a central tool. This allows climate-related key figures to be monitored monthly and distributed to the Group Executive Board and the responsible managers – particularly plant managers – as part of energy and CO₂ reporting. In-depth findings from the monitoring of climate-related topics are summarised annually in a Corporate Environmental Report. Sustainability and Process Management is also responsible for the annual sustainability report according to GRI Standards, including the sustainability strategy, key figures sustainability, as well as various additional reporting standards such as SASB, SDG and UNGC. It is also responsible for reporting in line with the Carbon Disclosure Project (CDP).

Either the individual business units or – centrally – Sustainability and Process Management are responsible for planning and implementing the measures detailed in the twelve modules included in the sustainability strategy. In terms of direct responsibility, the production plants are responsible for the green production module, Group logistics for the green logistics module, and Group purchasing for the sustainable supply chains module. A network of EHS managers at the production plants coordinate environment, health and safety topics and implement the goals and measures from the sustainability strategy locally together with plant management. Additionally, a global meeting takes place once a year, where managers discuss best practice and further develop Group-wide standards and processes.

The Corporate Governance report included in the Annual Report 2022 contains further information on the governance structure.

2. Strategy

According to TCFD guidelines, a distinction is made between physical risks and transitional risks and opportunities. Material risks and their financial significance are regularly reviewed and assessed by Geberit as part of risk management.

Physical risks include short-term acute, extreme weather events and longer-term chronic, localised effects such as increasing average temperatures, rising sea levels or increasing periods of drought. These short-term and longer-term effects may result in damage to property and infrastructure, adversely affect logistics operations or cause disruptions in the supply chain. Rising average temperatures and an increase in the number of hot days lead to increased energy demand for the cooling of machines, processes and workplaces during the summer months, as well as to a possible reduction in energy demand for heating buildings in the winter. Rising sea levels may mean that production sites located on the sea have to be protected against flooding.

All in all, the physical risks affecting Operations in particular (Purchasing, Production and Logistics) are classified as being of low to moderate risk.

Transitional risks and opportunities arise from new legal, technological, societal and economic trends and framework conditions triggered by climate change.

• Changes in environmental protection laws and tighter regulations may lead to stricter requirements concerning energy efficiency and the use of renewable energy sources, as well as an increase in CO₂ taxes on fuels and combustibles, leading to increased energy costs. In terms of water, lower availability and poorer quality may also result in stricter requirements. This would lead to increased demand for water-saving sanitary systems – particularly toilets – and Geberit could gain market shares.
• The trend towards resource efficiency and a circular economy is leading to increasing demands in terms of the quality, durability, repairability and recycling of products and building materials. These developments could have an impact on the product portfolio and production plants. Furthermore, customers, investors and employees also have increasing expectations in terms of sustainable, low-carbon products and services. With its high-quality, durable products, Geberit is well positioned and has the opportunity of gaining further market shares.
• The biggest opportunity for Geberit can be found in the limited local availability of water in many places as the result of climate change. In the risk analyses conducted periodically by the World Economic Forum (WEF) and published in its Global Risk Report 2023, water scarcity (a central topic in the context of crises in natural resources) was classified as one of the ten highest global risks in terms of impact over the next ten years. This trend has an influence on the development of sanitary technology. Water-saving, resource-efficient products will become increasingly important. Geberit is taking advantage of the opportunity to meet the growing worldwide demand for water-saving products and to contribute towards the diligent handling of water, thus making a name for itself as a leader in sustainability. Water-saving products already make a substantial contribution to Group sales.

All in all, the trends and changes addressed above primarily result in opportunities for Geberit to gain market shares as a sustainability leader and market leader in sustainable sanitary products.

Integration in business processes

In order to minimise risks and utilise opportunities on the market, Geberit’s overall strategic approach is of key importance: Geberit integrates the sustainability approach step by step in its business processes and core business – and has been doing so for over 30 years. Sanitary technology behind the wall combines reliability and quality with innovation. This allows for easy, quick and reliable planning and installation. Meanwhile, bathroom systems in front of the wall offer convincing design, functionality and sustainability, for example, in terms of saving water. By applying the eco-design principle, each product is inspected and optimised throughout the entire life cycle. By developing and selling water-saving sanitary solutions, Geberit makes a valuable contribution to saving increasingly scarce drinking water resources. A second major contribution can be found in climate change mitigation – saving water also means saving energy, and thus indirectly also a reduction in CO₂ emissions.

With the consistent implementation of its sustainability strategy and CO₂ strategy, Geberit is working on minimising risks caused by climate change and taking advantage of the associated opportunities.

New CO₂ strategy

The Geberit Group stands for an ambitious and implementation-oriented approach in its activities. This also applies to the new CO₂ strategy. The central element is the integration of the CO₂ strategy in all relevant and existing business processes as well as the handling of CO₂ emissions as external costs by means of internal CO₂ pricing. In this way, Geberit wants to ensure that the procedure of reducing the company’s carbon footprint is widely supported within the company, incorporated in daily business activities, and that the measures taken have a long-term, sustainable effect.

Transparency

The annual preparation of a comprehensive corporate eco-balance is an established part of environmental management. It covers all production plants worldwide, central logistics in Pfullendorf (DE), other smaller logistics units and the larger sales companies. Since 2012, a carbon footprint has been calculated along the value chain (Scopes 1 to 3), see CO₂ and other emissions.

As part of the new CO₂ strategy, internal reporting has been further expanded: Key figures on CO₂ emissions are included in the regular monthly reporting and forecasting processes. Additionally, the calculation of the carbon footprint (Scopes 1 and 2) was also audited externally for the first time as part of a limited assurance engagement, see Audit report greenhouse gas balance.

In addition to focusing on Scope 1 and 2 emissions, work also continued on the transparency of Scope 3 emissions. This took place on a product level as part of environmental product declarations (EPDs) and also for Scope 3 emissions from the supply chain.

Accountability

Since 2022, the annual achievement of targets in reducing CO₂ intensity has been integrated as one of five equally weighted criteria in the calculation of the Group bonus. The annual reduction goals are thus bonus-related with a weighting of 20% for the entire Group management (around 220 managers) as well as for the employees in Switzerland (a total of 1,500 employees).

CO₂ pricing

The internal CO₂ pricing is of central importance. Once a year, the Group Executive Board suggests a CO₂ reference price as part of the budget, which is then approved by the Board of Directors – this was EUR 60 per tonne of CO₂ for 2022. This is based on the price of the European Emissions Trading System (ETS) for CO₂. The internal CO₂ reference price embodies the reference costs for saving one tonne of CO₂. An implicit CO₂ project price is calculated for each project using an economic efficiency calculation. This serves as a basis for deciding on investments in measures to reduce energy or CO₂.

Energy

Pivotal in the CO₂ strategy are measures for saving energy, increasing efficiency, heat recovery and procuring energy in the plants. The corresponding measures are drawn up and implemented as part of an energy master plan and a rolling CO₂ forecasting of the significant plants. The proportion of renewable energies is being further increased throughout the company, always taking the internal CO₂ reference price and the economic efficiency of the planned projects into consideration. There are various ways of doing this: purchasing high-quality green electricity, long-term Power Purchase Agreements (PPA) with selected operators, or the installation of proprietary photovoltaic systems on the roofs of the production plants to generate electricity to be used within the company, see Energy.

Structural reduction

Accordingly, the area of ceramics, which accounts for around two-thirds of all Geberit’s CO₂ emissions (Scopes 1 and 2), has the largest savings potential. This includes a special focus on the reduction of scrap rates and refiring rates. The firing process and the use of the resulting waste heat will be continually optimised. This can be used for other process steps, such as drying the plaster moulds or ceramic blanks. Furthermore, projects were launched to investigate the possibilities of switching to renewable energy sources – for example, green hydrogen – in the long term as well as the systematic reuse of ceramic waste, see Resources and circular economy.

Geberit also contributes to reducing Scope 3 emissions as part of purchasing and product development. Furthermore, since 2007 all new products have been optimised in terms of sustainability as part of eco-design workshops. Seen across the entire life cycle, each product should be better than its predecessor from an ecological perspective – and all without sacrificing on quality, functionality or durability. With regard to the individual areas in the upstream and downstream value chain, the planned measures are aiming for the following improvements:

• Ensuring high quality, durability and repairability
• Reduction of water and energy consumption in the product use phase
• Reduction of the quantities of material used
• Increasing the share of recycled and sustainable, CO₂-reduced materials
• Simplification of dismantling and recycling products and their components
• Reduction of packaging material
• Optimisation of transport routes and maximising shipping container utilisation

The sustainable design of products makes a significant contribution to Scope 3 emissions at Geberit. Through the continuous development of products, Geberit can secure competitive advantages at customers with an increased awareness of sustainability, gain technological competitive advantages and reduce potential risks resulting from future environmental regulations.

A sustainable supply chain also contributes to reducing risks. In principle, Geberit’s production processes entail a high in-house production depth, i.e. it largely purchases raw materials and semi-finished products with a high share of raw materials. Geberit’s suppliers are obligated to maintain comprehensive environmental and social standards. Supplier management incorporates a risk management approach on environmental, occupational safety and human rights matters, among other aspects. The selection of suitable raw materials with minimal CO₂ emissions plays an increasingly important role, and is addressed in discussions with suppliers and included in decision-making processes, see Purchasing. Climate risks at suppliers can lead to difficulties in raw material procurement for Geberit and thus affect operational workflows in production at the company. Risk management towards a sustainable procurement strategy for raw materials with a strong regional and local orientation helps to better manage and reduce climate risks in the supply chain.

Offsetting or removal

Geberit has the goal of significantly reducing CO₂ emissions on its own, wherever possible. There is an increasing demand for low-carbon or carbon-neutral products among customers. As part of the new CO₂ strategy, Geberit is testing out the approach of calculating currently unavoidable CO₂ emissions based on the environmental product declaration (EPD) for ceramic appliances and compensating for these by investing in a selected, high-quality climate change mitigation project. In 2023, a pilot project was started with the myclimate foundation from Switzerland in order to gather initial experiences.

3. Risk management

The Geberit Group has a risk management system that is approved by the Board of Directors. The risk policy defines a structured process according to which the business risks, including sustainability and climate risks, are systematically assessed and managed. In this process, the risks are identified, analysed and assessed in terms of their probability of occurrence and extent, and measures are then defined to control the risks. Operationally, the Group Executive Board is responsible for controlling risk management. In addition, responsible persons are designated in the company for significant individual risks; in the case of sustainability and climate risks, this is the Head Corporate Sustainability and Process Management. These responsible parties decide on specific actions for risk mitigation and monitor their implementation. The Internal Audit Department coordinates the risk management process and issues a risk report for the attention of the Board of Directors every other year. Significant risks are also constantly discussed in the meetings of the Group Executive Board and Board of Directors, which take place on a regular basis.

Integration of climate risks in general risk management at the organisation

The risk management process involves the following steps:

1. Risk identification and classification: Correct identification and assessment of the significant risks. These are discussed in depth every other year by the Group Executive Board and the Board of Directors.
2. Risk analysis: Assessment of specific business risks and analysis of the changes since the last survey. The former is assessed with the Probability of Occurrence, on a scale of improbable (1) to frequent (5). To scale the effects of a risk that has been identified, the scale of the Impact of Risk Event is used. The scale ranges from insignificant (1) to very critical (5). The risks are classified on the basis of the combined scores.
3. Risk management: Instruments, measures and responsibilities are defined for each risk and checked at regular intervals.
4. Risk monitoring and reporting: Risk monitoring is part of regular reporting to the Group Executive Board and the Board of Directors, and is also part of the risk assessment that takes place every two years.

Risks associated with climate change are an integral part of the overall risks of the company and are therefore also taken into account in risk assessment.

Assessment of risks and opportunities arising from climate change

The following table shows the most important climate-related risks and opportunities that Geberit has identified to date and assessed as having a possible impact on the company.

In terms of climate change, the risks for Geberit are outweighed by the opportunities. The risks are classified as being of low to moderate risk. Stricter environmental rules and regulations – particularly in terms of energy, water consumption and water quality – and greater environmental awareness among customers in general are creating additional demand for durable products that conserve water, energy and resources. Geberit already offers a wide range of suitable products here.

Risks and opportunities arising from climate change were also discussed with the external stakeholder panel in 2020 and 2022. As detailed in the Panel Statement 2020, the panel members assume that the political and regulatory framework conditions on climate change mitigation will change and become stricter. The demand for water-saving products as a result of climate change is assessed as “moderate” by the panel. However, it is expected that the demand for products that improve drinking water quality and hygiene will increase. Similarly, there will also be an increasing demand on the market for products that can be repaired and reused, or can be recycled. As detailed in the Panel Statement 2022, the panel all agreed that the development of innovative, durable sanitary products with exceptional quality and design is pivotal for Geberit, as is resource efficiency in production and during the product use phase. As a result, the focus on the innovation and sustainability of sanitary products in the strategy is particularly important in minimising climate-related risks for Geberit in future and utilising the opportunities to their full potential.

4. Key figures and goals

For many years, Geberit has disclosed comprehensive key figures and goals on sustainability and CO₂ as part of its sustainability reporting:

• CO₂ and other emissions
• Key figures environment
• 10-year key figures environment
• CO₂ pricing