We promote good corporate governance and respect our stakeholders. We consider good governance practices, including efficient risk management processes, the foundation for conducting business.
Our climate ambition work helps us and our customers to become more sustainable.
Our governance structure and practices are the foundation for conducting business.
During the year 2020, the Board discussed climate matters three times. In February 2020, the Board decided to set a 1.5 degree climate ambition. This means Cargotec has joined the Science Based Targets initiative as well as the UN Business Ambition for 1.5°C campaign and committed to reduce greenhouse gas emissions in line with the 1.5°C warming scenario, which is the most ambitious goal of the Paris Agreement. The climate ambition was published in the Annual General Meeting in May. In June, the Board discussed climate-related risks and opportunities and the identified emission reduction opportunities. In October, the Board discussed the findings of the business areas’ gap analysis. Climate matters have been presented to the Board by SVP Strategy or VP Sustainability, depending on the topic. The Board has stated that climate-related risks and opportunities, as well as targets and action plans, should be embedded into the businesses' strategies.
Climate-related risks and opportunities are considered in the strategy process. Our strategic focus areas customer centricity, services, digitalisation and productivity support eco-efficient and sustainable cargo flow throughout the value chain. Business plans, related performance objectives, annual budgets and major capital expenditures such as acquisitions and divestitures are based on the strategy. While the Board has oversight of the strategy, risk management, business plans, related performance objectives and major capital expenditures, the CEO together with Cargotec’s Leadership Team are responsible for the implementation of the targets and business plans. As the strategy covers the climate-related risks and opportunities, the CEO is responsible for assessing and managing climate-related risks and opportunities.
Key climate-related risks and opportunities
Cargotec’s business strategy has been influenced by the identified climate-related risks and opportunities. Overall, they are well supporting our business strategy. Our goal is to mitigate climate change by constantly seeking to increase the energy efficiency and decrease the emissions of our products, for example by offering electric versions. The financial planning period is three years, while the underlying megatrends are assessed with a long-term time horizon, as well as the electrification roadmaps are long-term by nature. Technology and market risks are deemed as the most material, while at the same time seen as the greatest opportunities. Transforming the industry and mitigating climate change with low-carbon solutions for customers is a great opportunity for us. We recognise that high demand for certain materials can lead to increased direct cost, which can affect our electric offering that is dependent on the availability of high-capacity batteries. We expect the demand for low-carbon products and services to increase. With planned further investments in R&D and innovation, we are seizing the opportunity to develop new products and access new and emerging markets, besides exploiting the increasing demand. However, in case of more expensive low-carbon products, the demand and willingness to pay are more uncertain. It is our challenge to make the low-carbon technologies superior also from the economic point of view. We aim to ensure the customer-product fit through R&D and supply chain expertise.
In terms of the physical consequences of climate change, business interruption is recognised as a potential risk. Our business model is based on a multi-tier supply chain that is more vulnerable in case of an extreme weather event. This could impact our production capacity and revenues.
The identified climate-related opportunities relate to digitalisation, electrification, robotics, renewables and circular economy and have all been considered in our strategy and financial planning already in previous years. For example, the Cargotec’s eco portfolio was established already in 2017 to gather together the products and services that enhance customers’ sustainability, and to disclose the share of the eco portfolio sales. Besides electrification, also automation and connectivity are considered as very promising measures to improve the efficiency of customers’ operations. We have been investing in software and digital businesses as we see digitalisation will make cargo handling more efficient and there will be increasing demand for efficient solutions in the future. It will also be a major enabler for a wider societal change towards a more circular economy. Data sharing, common platforms and collaboration act as key drivers in achieving these targets and connecting industries.
In our own operations, the identified climate-related risks and opportunities have led to setting the target to make our own operations carbon neutral by 2030. With full control over our own operations, we wanted to be more ambitious and reach carbon neutrality well before 2050, ahead of the EU's target. We plan to study the climate-related risks and opportunities in more detail during the next strategy and financial planning round in 2021.
Read more in the Board of Director's report p.41-60 in our Annual report 2020.