Climate-related opportunities and risks

Climate change has a direct impact on various sectors of the economy, which could have direct and indirect consequences for NORMA Group over a long-term time horizon until 2030.

On the one hand, both the reduction of greenhouse gases and the adaptation to global warming offer opportunities for NORMA Group. These include, for example, new or growing market segments in the fields of e-mobility and water management, which can have a positive impact on sales development. At the same time, energy savings offer the potential to reduce NORMA Group’s operating costs. Last but not least, NORMA Group can benefit from the increasing relevance of this topic in the financial markets by positioning itself as a sustainable investment and thus reducing capital costs.

Conversely, risks can also result from these developments. For example, the increase in the production of alternative forms of drive leads to a decline in the market for conventional drives, a market in which NORMA Group is also active. Increased pricing of greenhouse gases may result in higher operating costs. On the capital market side, a changed reputation can lead to reluctance on the part of capital market players focused on sustainability and thus to higher capital costs.

NORMA Group meets these opportunities and risks with a clear strategy and active management in the areas of WATER MANAGEMENT, E-MOBILITY and RESEARCH AND DEVELOPMENT. With regard to the risks arising from its own production processes, NORMA Group operates a structured environmental management system at all production sites, with clear targets for reducing greenhouse gases.

An overview of opportunities and risks within the scope of the voluntary applicable standard of the ‘Task Force on Climate-Related Financial Disclosures’ can be found in the public CDP REPORT of NORMA Group.

Progressive climate change does not only mean risks and opportunities for NORMA Group’s business. NORMA Group’s business activities also contribute to the emission of greenhouse gases. This applies in particular to emissions caused by the production of purchased materials and its own production processes.

Active management of e-mobility opportunities

NORMA Group aims to make an active contribution to e-mobility by developing new products such as quick connectors and thermal management systems. These solutions support optimizing the cooling and heating of batteries, as well as the complex power electronics, the drivetrain and other sub-systems of electric vehicles. During product development, they are tailored to solve the main challenges faced by customers: weight savings, lack of space and the reduction of pressure drops of coolants in the system. The latter is decisive to ensuring optimal performance of the thermal management systems of batteries, power electronics, drivetrains and other components. Only if the flow of coolant is properly managed throughout the entire system the thermal management is working efficiently, and no additional pump upsizing (and thus extra weight and cost) is needed. As a result, the battery can deliver its optimal performance and maximize the range of the vehicle.

In addition to providing solutions to these requirements, NORMA Group also ensures high safety standards by applying its experience in the design of fuel transport systems in the delicate environment of batteries and cooling water.

NORMA Group manages its e-mobility efforts in a project-based organization at the interface between engineering and sales. In doing so, the Company has the flexibility to confront an emerging and very dynamic market and to connect the new challenges to the existing product portfolio and customer expertise. Last year, relevant internal stakeholders again received extensive training. To ensure global alignment and steering, all projects are coordinated and supported by Global Product Management E-Mobility.

Marked decrease in production-related emissions (Scope 1 and 2)

NORMA Group is currently concentrating on the collection and management of its greenhouse gas emissions from gas consumption (Scope 1), as well as from purchased electricity and district heating (Scope 2) at its production sites. Regarding electricity and district heating, emissions are calculated using a combination of location-based and market-based methodologies: NORMA Group uses emission factors from specific suppliers wherever these are available (market-based). If this is not the case, NORMA Group uses country emission factors provided by the International Energy Agency (location-based). Values on emissions calculated according the location-based methodology can be found under CR PERFORMANCE INDICATORS.

In 2021, Scope 1 emissions amounted to 5,678 tons of CO2 equivalents (2020 revised: 5,417 tons), while Scope 2 emissions were 37,771 tons of CO2 equivalents (2020: 44,396 tons). Overall, emissions from Scope 1 and 2 were thus 43,449 metric tons of CO2 equivalents, 12.8 % below the previous year’s figure (2020: 49,813 tons). One reason for the decline in emissions is the purchase of renewable energy.

The corresponding energy consumption of gas, electricity and district heating (combined) was 130,170 megawatt hours or 119.2 kilowatt hours per EUR thousand of revenue (2020: 124.2 kilowatt hours per EUR thousand of revenue). The sharp increase compared with the previous year can also be explained by the effects of the COVID-19 pandemic on production capacity. The normalized energy consumption decreased by 4.0 %, due to several initiatives, such as the installment of intelligent energy reporting systems in Qingdao and Changzhou to monitor and analyze energy consumption, LED light installation, compressor efficiency improvement as well as climate protections trainings within NORMA Group.

Target to reduce greenhouse gas emissions

Climate-relevant CO2 emissions are a significant non-financial performance indicator for NORMA Group. For Scope 1 and 2 emissions, NORMA Group has set itself an absolute reduction target. NORMA Group aims to reduce its absolute Scope 1 and 2 emissions by at least around 19.5 % compared to 2017 by 2024. In setting its climate target, NORMA Group followed the recommendations of the SCIENCE-BASED TARGETS INITIATIVE (Science-based target setting tool 1.1, Absolute Contraction Approach). The target does not consider emissions resulting from growth by acquisitions and forms part of the Management Board’s remuneration components. REMUNERATION REPORT

In order to achieve this goal, NORMA Group manages the energy consumption of all production sites and is integrating the energy reduction targets into its ENVIRONMENTAL MANAGEMENT SYSTEMS. At NORMA Group, the individual plant management is responsible for the concrete measures taken to reduce energy consumption and thus greenhouse gas emissions.

Quantification of emissions along the value chain

In addition to its efforts to reduce emissions at its production sites, NORMA Group is also committed to managing greenhouse gas emissions along the value chain (Scope 3 emissions). This includes the supply chain, as large amounts of energy are often required to produce the materials and components that NORMA Group purchases. RESPONSIBLE PROCUREMENT

Last year, NORMA Group also quantified the resulting emissions for other Scope 3 categories (emissions from capital goods, waste, business travel and commuting by employees). An overview of all Scope 3 reporting categories can be found in NORMA Group’s public CDP REPORT.

Legend

These contents are part of the Non-financial Group Report and were subject to a separate limited assurance examination.