Climate risk impact
In 2022 Elopak conducted a climate risk analysis by establishing a framework for identifying and assessing both physical risks and transition risks/opportunities such as regulations and technological developments. In order to comprehensively map and analyze risks and opportunities, information and insights on three important parameters was gathered: Impact, likelihood and time horizon.
From the outset, we had a long list of potential climate-related risks and opportunities for Elopak. Through internal and external processes (e.g. supplier meetings) we reduced this to a shorter list which we find represents the most material risks and opportunities for Elopak. All risks and opportunities listed below is assessed to have either high or medium likelihood to occur.
Impact assessment matrix
Annual Impact | Low | Medium | High |
Revenue Cost | Less than 20m EUR Less than 5m EUR | 20-80m EUR 5-20m EUR | More than 80m EUR More than 20m EUR |
Time horizon: Describes when each impact factor has the highest probability and relevance for Elopak (short – medium – high). Some impact factors may be relevant already today and will remain so towards 2030.
Response: Describes the mitigating activities related to the identified risks. As the nature of the risks are either regulatory or medium to long-term physical risks, the response cost of the risk is not specified. Some activities are already on-going, while others will be implemented over the coming years.
Competition from other low-carbon packaging alternatives
Regulatory risk
Risk factor | Mitigating action |
Efforts to decarbonize PET bottles, including efforts like using 100% recycled PET, replacing PET altogether with bio-based alternatives, or designing bottles for reuse to prolong product longevity. | Increase share of renewable materials in cartons, develop competitive products through innovation |
Impact | Time horizon | Category |
High | Short | Revenue |
Changing landscape for packaging regulations
Regulatory risk
Risk factor | Mitigating action |
Regulation is becoming a key driver to push companies to adopt sustainable values and behaviors in their businesses. The EU may lead but other countries likely to follow. | Increase efforts through trade associations, input to regulating authorities, product development and innovation, evaluate measures to increase recycling capacity. |
Impact | Time horizon | Category |
High | Short | Revenue |
Technological developments for carton recycling require investment and/or product development
Regulatory risk
Risk factor | Mitigating action |
The collection, sorting and recycling infrastructure for cartons is a bottleneck for the whole industry. Implementation of technological developments are needed to ensure cartons are recycled at scale. | Increase efforts through trade associations, input to regulating authorities, assess initiative potential throughout the recycling value chain, evaluate measures to increase recycling capacity. |
Impact | Time horizon | Category |
High | Medium | Cost |
Constrained access and price fluctuations for low-emission materials
Regulatory risk
Risk factor | Mitigating action |
Competition for low-carbon materials will likely increase in line with the market-pull towards low-carbon and circular packaging, resulting in continuous price and supply fluctuations. | Supplier qualification, develop range of offerings, diversify share of renewable materials, evaluate alternative materials, pricing strategy. |
Impact | Time horizon | Category |
Medium | Short | Cost |
Chronic droughts or water shortages in areas of direct operations or upstream value chain
Physical risk
Risk factor | Mitigating action |
This is already an issue today, as plants has experienced days with indoor air temperature being higher than 40°C. The facilities in India, Saudi Arabia and Morocco have the highest exposure. The main impact for this risk factor is in Elopak’s downstream value chain, such as for juice and dairy producers (risk of reduced access to products). | Local risk assessments, understand customer risk assessments, diversify range of carton offerings – access to new markets, geographical footprint. |
Impact | Time horizon | Category |
Medium | Long | Cost |
Wildfires impacting raw material volumes in the upstream value chain
Physical risk
Risk factor | Mitigating risk |
Data suggests that climate change will strongly increase the likelihood of forest fires, with the potential to impact our access to board. A study on Finland found an increased probability of forest fire danger days by 56-75% for 2010−2029 and 71-91% for 2080−2099. | Understand supplier risk assessments, develop a common understanding of mitigation approach. Supplier response examples: forest monitoring activities, geographical diversification. |
Impact | Time horizon | Category |
Medium | Long | Cost |
Extreme storm events disrupting direct operations for up to one week
Physical risk
Risk factor | Mitigating risk |
For the facilities in Northern Europe, including those in the Netherlands and Denmark, the frequency of rainfall extremes is projected to increase by 45% in a 2°C temperature rise scenario. For locations such as Ukraine and Eastern Canada, the probability of extreme rainfall also increases by 37% and 55% respectively. | Local risk assessments, understand supplier risk assessments, develop a common understanding of mitigation approach. Supplier response example: Alternative transport route planning. |
Impact | Time horizon | Category |
Low | Medium-Long | Revenue/cost |
Offering low-carbon and circular alternatives
Opportunity
Opportunity factor | Mitigating action |
The global sustainable packaging market is projected to grow between 5.3% and 7.5% CAGR between 2022 and 2028 (Fortune Business Insights and Mordor Intelligence). Offering low-carbon, circular alternatives to packaging is an important measure to keep up with consumer trends and political requirements. | Develop competitive and low carbon products, increase renewable share, succeed in scope 3 emission reductions, supplier development, initiatives to increase recycling capacity. |
Impact | Time horizon | Category |
High | Short | Revenue |
Rising costs related to CO2
Opportunity
Opportunity factor | Mitigating action |
The cost of CO2 is not directly relevant for Elopak, but it is extremely relevant for plastic producers reliant on carbon-intensive processes and materials. The rising cost of carbon emission is intended to induce the transition from carbon intensive fuels and towards the application of less carbon intensive alternatives. This increasing cost is directly applied to the plastics value chain, potentially making carton packaging more cost competitive. | Develop competitive and low carbon products, increase renewable Polyethylene share, supplier development, increase range of renewable polymer offerings. |
Impact | Time horizon | Category |
Low | Short | Revenue |