In November 2023, 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 the most important 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. Risks and examples are reassessed annually.
The following scales were used for severity and time horizon:
Severity:
- Very low <0.1 EUR million
- Low 0.2–2 EUR million
- Medium 3–20 EUR million
- High 20–200 EUR million
- Very high >201 EUR million
Time horizon:
- Short <2030
- Medium 2030–2040
- Long 2040–2050
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. In 2023, Nokian Tyres achieved one of its key climate targets seven years in advance and made a commitment to achieve net-zero greenhouse gas emissions by 2050. The company is currently in the process of having new, more ambitious emission reduction targets to be validated by the SBT. The new scope 1 + 2 emission targets will be aligned with the 1.5 degrees pathway.
CLIMATE-RELATED RISKS
| Risk group | Sub category | Examples of concrete risks | Time horizon | Severity (Financial impact) | Probability | Adaptation / mitigation plan | |
| Transition risks | Regulatory | Emerging regulation | Deforestation-related regulation (EUDR), concerning natural rubber | Short | Medium | High | Follow-up of emerging regulation |
| Medium | Low | High | |||||
| Long | Low | High | |||||
| Green regulation on aviation and maritime fuels can significantly increase costs of logistics | Short | Low | High | ||||
| Medium | Low | High | |||||
| Long | Very low | High | |||||
| Further environmental fees | Additional taxes and duties e.g. EU’s CBAM for fossil raw materials can increase prices. Carbon taxes. Certification costs | Short | Medium | High | Participation in industry sector working groups | ||
| Medium | Medium | High | |||||
| Long | Medium | High | |||||
| Stricter expectations to oversight | Increased verification testing of products and emission measurements, including LCA, EPD | Short | Low | Medium | Follow-up of emerging regulations | ||
| Medium | Low | High | |||||
| Long | Low | High | |||||
| Technological | Climate-related demands for new tire technology | A+ rolling resistance tires required for EVs | Short | Medium | Low | Anticipation of future expectations in R&D development road maps | |
| Medium | Medium | Low | |||||
| Long | Medium | Low | |||||
| 150 km/h max speed for EU – demand for UHP (Ultra High Performance) tires declines | Short | Low | Low | ||||
| Medium | Low | Low | |||||
| Long | Low | Low | |||||
| Market and reputation | Market changes | Shift from car ownership to mobility-as-a-service i.e. changing customer base | Short | Low | Medium | Update product and service offering | |
| Medium | Medium | Medium | |||||
| Long | Medium | Medium | |||||
| Tire raw materials | Replacing fossil-based raw materials with more expensive renewable and recycled materials | Short | High | High | Road map for selective use of renewable and recycled raw materials | ||
| Medium | Medium | High | |||||
| Long | Medium | High | |||||
| Replacing raw materials that have a high carbon footprint with materials with a lower carbon footprint. Availability and price of materials | Short | High | High | Selective use of lower carbon footprint materials | |||
| Medium | Medium | High | |||||
| Long | Medium | High | |||||
| Energy | Green energy prices go up due to strong demand | Short | Low | High | Long term power purchasing agreements | ||
| Medium | Medium | High | |||||
| Long | Medium | Medium | |||||
| Raw material and transportation price increases due to higher energy prices | Short | Low | Medium | Long term contracts | |||
| Medium | Low | Medium | |||||
| Long | Low | Medium | |||||
| Tire raw materials | Availability of renewable and recycled raw materials can limit plans for sustainability | Short | Low | High | Aiming for multiple sources | ||
| Medium | Low | High | |||||
| Long | Low | Medium | |||||
| Tire demand | Increased demand for all-season tires, decreased demand for winter tires | Short | Low | High | Update product offering | ||
| Medium | Low | High | |||||
| Long | Low | Medium | |||||
| Reputational risk | Deforestation scandals (natural rubber) | Short | Low | Low | Co-operation with supply chain in line with GPSNR recommendations | ||
| Medium | Low | Low | |||||
| Long | Low | Low | |||||
| Unintentional incorrect sustainability information | Short | Low | Low | Systematic information verification practices | |||
| Medium | Low | Low | |||||
| Long | Low | Low | |||||
| Physical risks | Physical | Extreme weather events | Disruptions in logistics and force majeure situations | Short | Low | Medium | Alternative transportation routes |
| Medium | Low | Medium | |||||
| Long | Low | Medium | |||||
| Permanent changes in logistics and/or increased force majeure situations (chronic) | Short | Low | Low | Alternative transportation routes | |||
| Medium | Low | Low | |||||
| Long | Medium | Low | |||||
| Impact of extreme weather events on natural rubber producers | Short | Low | Low | Alternative sourcing locations | |||
| Medium | Low | Low | Alternative materials | ||||
| Long | Low | Low | Alternative materials | ||||
| Extreme temperatures | Contamination/lower quality of raw materials | Short | Low | Low | Multiple supply sources | ||
| Medium | Low | Low | |||||
| Long | Low | Low | |||||
| Extreme weather events | Disruption on own production and/or distribution | Short | Low | Low | Location selection and building design. Insurances. | ||
| Medium | High | Low | |||||
| Long | High | Low |
CLIMATE-RELATED OPPORTUNITIES
| Opportunity group | Sub category | Examples of concrete opportunities | Time horizon | Financial impact | Probability | Implementation plan |
| Innovation | Raw materials | Innovations with renewable / recycled / local materials | Short | Medium | High | Material development road map to reach 50% share of renewable or recycled raw materials by 2030 |
| Medium | High | High | ||||
| Long | High | High | ||||
| Innovations with low carbon footprint raw materials | Short | Medium | High | |||
| Medium | High | High | ||||
| Long | High | High | ||||
| Recycling | Cooperation with innovative recycling companies | Short | Low | High | Screening of opportunities and widening of cooperation | |
| Medium | Medium | High | ||||
| Long | High | High | ||||
| Climate-friendly technology | Lower rolling resistance products. Climate-friendly production | Short | High | High | Product development road map. New zero CO2 factory to Romania being implemented | |
| Medium | High | High | ||||
| Long | High | High | ||||
| Energy-efficient production | Modern machinery used in Nokian Tyres’ factories | Short | Medium | Medium | New zero CO2 factory to Romania being implemented | |
| Medium | Medium | Medium | ||||
| Long | Medium | Medium | ||||
| Product range | Competitive advantage | As an expert in demanding and challenging weather conditions, Nokian Tyres’ share in winter tire markets is strong. Readiness to increase the share further, should the extreme weather phenomena increase in the future | Short | Low | High | Innovations and developing product portfolio to meet future winter conditions, increasing consumer awareness |
| Medium | Medium | High | ||||
| Long | High | High | ||||
| Increase of all-season tire sales in Europe due to milder winters | Short | High | High | Developing product portfolio by deploying knowhow of winter conditions | ||
| Medium | High | High | ||||
| Long | Medium | High | ||||
| EU's ESG regulations | Increased share of sustainable raw materials | Short | Medium | High | Innovation and early adaptation of regulations | |
| Medium | Medium | High | ||||
| Long | Low | High | ||||
| Tire regulation for wear resistance (abrasion) | Short | Medium | High | Product development | ||
| Medium | Low | High | ||||
| Long | Very low | High | ||||
| Industrial (heavy) tires | Existing expertise to provide climate-friendly solutions, e.g. intelligent sensor technology | Short | Medium | High | Product development | |
| Medium | High | High | ||||
| Long | High | High | ||||
| Engagement | Consumers | Increase awareness of how tires can affect safety and carbon footprint | Short | Medium | High | Consumer education through communications and marketing |
| Medium | Medium | High | ||||
| Long | Medium | High | ||||
| Policy makers | Increased preparedness for new regulations or incentives | Short | Medium | High | Industry-wide cooperation and information sharing with decision makers | |
| Medium | Medium | High | ||||
| Long | Medium | High | ||||
| Shareholders / stakeholders | Climate-related sustainable financing and incentives | Short | Medium | High | Transparent sustainability targets, public reporting, collaboration with financial institutions, information sharing with stakeholders | |
| Medium | Medium | High | ||||
| Long | High | High | ||||
| Regulatory | Renewable Energy Directive and other climate regulation | More renewable energy available in EU, prices can decrease | Short | Low | High | Own investments/partnering for green energy |
| Medium | Medium | High | ||||
| Long | Medium | High | ||||
| Global carbon tax or similar would improve the company’s competitive position | Short | Low | Medium | Further improvement of corporate carbon footprint | ||
| Medium | Low | Medium | ||||
| Long | Low | Medium |