TCFD report

In 2024, Vetropack assessed climate-related risks and opportunities based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). We identified packaging regulations as the most relevant transition risk. On the other hand, by developing innovative thermally tempered lightweight glass bottles for reusable systems, we are in a position to offer packaging that promotes the circular economy and is in line with the EU Packaging and Packaging Waste Regulation (PPWR). One crucial element of our transition plan consists of our greenhouse gas emission reduction targets, which were validated by the Science Based Targets initiative (SBTi) in the year under review.

A key milestone in our engagement for climate protection was the validation of our climate targets by the Science Based Targets initiative (SBTi) in August 2024. This validation demonstrates that our emission reduction pathway is in line with the Paris Agreement. To strengthen the systematic integration of climate-related aspects into our risk management and overall business processes, we began implementing the requirements of the Task Force on Climate-related Financial Disclosures (TCFD) in the year under review. To this end, we launched a multi-stage process to identify potential climate-related risks and opportunities, and to assess their impacts on our business model. This process involved Vetropack experts in various fields such as sustainability and risk management, as well as the company’s entire Management Board. Our strategic actions to address the identified climate-related risks and opportunities, as well as the decarbonisation roadmap, are core elements of our transition plan towards a low-carbon economy.

Governance

Vetropack’s organisational structure is based on a clear delineation of responsibilities and tasks. The Board of Directors takes ultimate responsibility for defining the company’s strategy. They approve our risk matrix as well as the climate-related risks and opportunities, and they define the adaptation and mitigation measures. The Board of Directors also oversees our Clearly sustainable strategic pillar: our climate targets and the transition plan are key elements of this strategic thrust. Therefore, the Board of Directors supervises the company’s progress in attaining the climate targets and successfully implementing the transition plan. At least once a year, the Group Sustainability Manager reports to the Board of Directors on behalf of the Sustainability Steering Committee regarding progress with our measures to reduce greenhouse gases. In addition, the Board of Directors approves the non-financial report, including the present climate-related reporting.

Our Extended Management Board is responsible for the annual update of the risk matrix, and thus for assessing and managing the climate-related risks and opportunities. The Extended Board defines risk mitigation measures as part of our transition plan. The CFO, as a member of the Management Board, participates in the annual update of the risk matrix. He also takes the lead in planning the financial resources required for our decarbonisation roadmap.

Vetropack’s Sustainability Steering Committee, with the CEO as a member, develops and defines the Group’s climate targets and the decarbonisation roadmap with the detailed emission reduction measures. This Committee’s responsibilities also include monitoring implementation of the transition plan.

The Group Sustainability Manager develops and coordinates the Clearly sustainable strategic pillar, including the transition plan. His work also includes setting the climate-related targets, defining the KPIs, and monitoring target attainment. The Group Sustainability Manager and the Risk Manager collaborate closely to identify and assess the climate-related risks and opportunities.

The Risk Manager leads the risk management processes for the annual update of our risk matrix, including the climate-related risks and opportunities. He is also responsible for identifying and assessing risks and opportunities in collaboration with the Group Sustainability Manager.

Finally, our local Managers are responsible for realising climate protection measures and actions to adapt to climate change.

The ESG governance section provides further insights into Vetropack's responsibilities in the area of sustainability.

Strategy

Climate-related risks and opportunities

The TCFD recommendations specify a distinction between climate-related physical risks and transition risks as well as opportunities. Chronic physical risks arise from climate-related weather patterns (such as temperature change and water scarcity). Physical risks triggered by climate change can be event-driven (acute physical risks) such as floods, or may manifest as long-term shifts in climate patterns (chronic physical risks) – for instance, persistently higher temperatures. Physical risks may have financial implications for organisations such as direct damage to assets. They typically offer no opportunities but require protective measures and corresponding financial investments.

The transition to a lower-carbon economy may require changes relating to policy, legislation, technology, or the market economy. Depending on the nature and speed of these changes, transition risks may entail financial risks of varying levels for organisations. Conversely, effective implementation of climate protection measures and successful adaptation of our business strategy can yield climate-related opportunities which, in turn, offer competitive advantages.

The following table shows the identified climate-related transition risks, their impact on Vetropack’s business model, and our actions to mitigate these risks. We have identified where in our value chain each of these risks occurs, and over which timeframe. The timeframe was assessed according to the criteria of the Science Based Targets initiative.

Climate-related transition risks

Transition risks	Impacts on Vetropack	Measures
Packaging regulation – Policy and legal risk – Value chain: own operations, downstream – Timeframe: near-term and long-term	– Minimisation of packaging and standardisation criteria in regulations may reduce demand for customised bottle design and new packaging – Financial impact: high	– Innovative lightweight glass packaging solutions for reusable systems – Rightweighting our packaging – Drive innovation as our strategic pillar to develop glass packaging in line with regulations
Energy price and carbon pricing – Policy and legal risk, also market risk – Value chain: own operations – Timeframe: near-term	– The glass industry is currently dependent on fossil fuels (natural gas, electricity). – Prices of fossil fuels increase and fluctuate. – Financial costs and decreasing competitiveness – Operational disruptions – Financial impact: high	– Implement the SBTi decarbonisation roadmap to reduce greenhouse gas emissions, and therefore costs due to carbon pricing – Use alternative and/or low–carbon energies – Produce renewable energy with solar panels – Increase recycled content to reduce energy demand in production
Customer and consumer preferences – Market risk – Value chain: downstream – Timeframe: long-term	– Alternative new packaging solutions with a smaller environmental footprint may adversely affect customers’ and consumers’ preference for glass – Financial impact: low	– Implementation of the SBTi decarbonisation roadmap – Participation in initiatives such as Friends of Glass to raise awareness of the health and environmental benefits of glass – Offering reusable, lightweight glass packaging in line with the circular economy

Climate-related physical risks

We carried out an analysis of climate-related physical risks with two different tools. One of these was the WWF Risk Filter Suite, which makes use of a water risk filter and a biodiversity risk filter. This first assessment was complemented by the ThinkHazard! tool, which is based on datasets from the Global Facility for Disaster Reduction and Recovery. This approach enabled us to determine the likelihood of various climate-related natural hazards, providing a starting point for identifying climate-related physical risks. The combination of the two tools delivered a picture of Vetropack’s potential exposure to climate-related physical risks.

As the scope of both these tools is limited, we have supplemented the assessment of climate-related physical risks with direct experience from our sites. To validate the results of the first assessment based on the tools mentioned above, we took account of local geographical conditions and the occurrence of past impacts or damage due to climate-related physical risks. The climate-related physical risks relevant to the entire Vetropack Group are shown in the table.

Physical risks	Impacts on Vetropack	Measures
Water–related issues – Chronic physical risk – Value chain: own operations – Timeframe: near-term, increasing in the long–term	– Water quality (including water temperature) may become a challenge as Vetropack depends on water for cooling the machinery – Water scarcity may limit water supply in the near–term and trigger stricter regulations in the long term – Financial impact: low	– Comply with local water legislation – Measure water temperature and water quality before discharge into municipal systems – Use water mainly in closed loops
Rising temperatures and heat stress – Chronic and acute physical risk – Value chain: own operations – Timeframe: near-term, increasing in the long–term	– Rising temperatures and extreme heatwaves may impair employees’ health and entail financial downsides due to restricted productivity – Financial impact: low	– Increase cooling capacity to ensure a healthy work environment for our employees – Provide fair working hours and regular breaks to safeguard employees’ health
Natural hazards – Acute physical risk – Value chain: own operations – Timeframe: near-term	– Extreme weather events such as floods can disrupt operations and damage the company – Financial impact: low	– Insurance for property damage and business interruption – Protective measures, if not provided by the municipality

Our plants regularly measure water temperature and quality before discharging water into municipal systems. If necessary, cold water may be added so we can ensure that the water temperature does not exceed the level of 30 degrees that is often required. We minimise water consumption by using water mainly in closed loops.

Due to the effects of rising temperatures, we are currently increasing our cooling capacity and using air conditioning in offices and production sites to reduce our employees’ exposure to heat stress. Because conditions in glass manufacturing are inherently hot, we support our employees by providing adequate supplies of fluids and regular breaks for cooling.

Although floods have affected some of our sites in the past, they did not interrupt our production. Due to the potential flooding risk in Pöchlarn (Austria), Hum na Sutli (Croatia) and Nemšová (Slovakia), protective measures have already been put in place by the local authorities.

Additionally, we have analysed any possible risks of wildfires and landslides, but the likelihood of these events occurring is presently rated as very low to non-existent.

Our most relevant climate-related physical risks are also assessed on site by our property damage insurer during ‘risk engineering visits’. Without global climate protection measures, we expect the effects of climate-related physical risks to become more severe in the long term. This leads us to view early planning of prevention and adaptation measures as all the more relevant.

Climate-related opportunities

The successful adaptation to climate change and implementation of mitigation measures can open up opportunities for organisations and positively impact their competitive ability. The extent of climate-related opportunities depends on the region, market, and industry in which an organisation operates. Vetropack has identified the following climate-related opportunities.

Opportunities	Impacts on Vetropack	Measures
Glass as a packaging solution in line with the circular economy – Products and services – Value chain: own operations, downstream – Timeframe: near–term and long–term	– Although regulations such as the PPWR define packaging reduction targets and ban single–use packaging, Vetropack benefits from these regulatory developments because glass is a material that is recyclable and reusable – Financial impact: medium	– Promote and advertise glass as a recyclable and reusable packaging in line with the circular economy – Manufacture innovative lightweight packaging solutions that can be used as a standard solution for reusable systems
Energy efficiency and renewable energies – Energy sources – Value chain: own operations, downstream – Timeframe: long-term	– By generating our own renewable energy, we become more independent and can cut costs – Using cullet as input material for new products reduces the energy demand in manufacturing – New energy-efficient technologies yield financial savings. – Financial impact: medium	– Install solar panels and optimise furnace technology – Make improvements to production performance and invest in new technologies – Rightweighting to reduce material and energy consumption without changing the purpose of the packaging – Increase cullet content to reduce energy demand in production – Source renewable energy (e.g. power purchase agreements)
Consumers’ preferences for glass packaging – Products and services – Value chain: downstream – Timeframe: long-term	– Glass packaging can be reused and recycled in closed systems – Consumers prefer glass packaging because it is healthy, ‘premium’, and helps to reduce (plastic) waste – Financial impact: low	– Offer innovative lightweight packaging solutions that can be used as a standard solution for reusable systems

Our transition plan

According to the TCFD framework, the transition plan is an aspect of our overall business strategy: it includes targets and measures to support the transition to a low-carbon economy. The transition plan contains emission reduction measures, and describes how the identified risks and opportunities impact our business model. As a glass packaging company, we recognise that we belong to an emission-intensive industry – and this makes it particularly urgent to decarbonise our business activities.

Brand owners and packaging companies in Europe are faced with new regulations to minimise packaging, aimed at achieving a circular economy and protecting the climate. The most relevant and best-known of these is the EU Packaging and Packaging Waste Regulation (PPWR), which defines requirements for packaging design and packaging waste management: its goal is to reduce the negative environmental impacts caused by increasing quantities of packaging waste. The PPWR aims to promote reuse and recycling while reducing packaging waste at the same time. We have identified this packaging regulation as a transition risk for our business model and for our offering of customised glass packaging. On the other hand, the PPWR harbours opportunities, given that glass is a circular material that can be recycled indefinitely and reused. For example: our innovative lightweight glass can be used as a standard solution for reusable systems, helping us to gain competitive edge in the packaging industry. Bottles made of this glass are around one third lighter than conventional reusable bottles, and are more resistant to abrasion. Bottles produced with this innovative manufacturing process save resources and reduce emissions – so they offer an optimal solution in view of future packaging regulations, as well as supporting the transition to a low-carbon economy. A customer success story about this packaging solution is available to read here. In 2024, moreover, we made a start on developing an industrial production machine for this type of glass packaging. More information about this is available in the Innovation section.

Offering reusable, standardised glass packaging meets the future requirements of our customers as well as the needs of eco-conscious consumers. Vetropack agrees with FEVE, the European Container Glass Federation, that switching to glass packaging is an effective way to reduce waste and promote the circular economy. We view glass as the optimal packaging material for the journey towards a low-carbon economy. Furthermore, glass offers reliable protection for food, preserves it, and reduces food waste.

To lessen the amount of material used and, therefore, the environmental footprint of glass packaging, we collaborate with our customers and apply the rightweighting approach. By implementing the rightweighting concept, we minimise the amount of material used while maintaining performance criteria such as quality, strength and design. More on this can be found in the Customer satisfaction section.

As part of our journey towards a low-emission economy, we have defined climate targets. One milestone along this path was the validation of our greenhouse gas emission reduction targets by the Science Based Targets initiative (SBTi) in 2024. Vetropack commits to achieve a reduction of 50.4 percent in its absolute Scope 1 and 2 emissions by 2032, compared to 2021 as the base year. We also aim to reduce absolute Scope 3 GHG emissions from purchased goods and services, capital goods, fuel- and energy-related activities, and upstream transportation and distribution by 30 percent within the same timeframe. To reach these targets, we have developed a decarbonisation roadmap containing detailed actions. Our most effective emission reduction measure is the optimisation of our furnaces to make them more efficient, increase the share of electricity they utilise, and thus reduce the use of natural gas. When furnaces are rebuilt, we optimise the processes so their energy efficiency is improved by 10 to 15 percent. In 2024, for example, we modernised one of the three furnaces and the related glass forming machines in Hum na Sutli (Croatia).

By investing in low-carbon energy, installing photovoltaic systems and generating our own energy, we are less dependent on municipal systems and thus on fluctuating energy prices. At the same time, we are able to cut costs as a result of implementing these climate protection measures.

We also aim to achieve an average recycled content of 70 percent in our glass packaging by 2030. Increasing the recycled content in our products helps us to lower the energy demand in production and thus reduce our exposure to volatile energy prices. A recycled content of 10 percent achieves energy savings of around 2.5 percent and reduces CO₂ emissions by about 5 percent (source: FEVE). More insights into our ambition of increasing the recycled content can be found in the Resources and Supply chain management sections. As a further step in 2024, we initiated dialogue with our suppliers regarding their commitment to climate protection. This establishes an important foundation for achieving our Scope 3 emission reduction target.

Business resilience based on scenarios analysis

To gain a better understanding of how the identified risks and opportunities impact Vetropack's business strategy, we conducted a qualitative scenario analysis to assess the resilience of our strategic response to potential risks and opportunities. Scenario analysis can play a key role in strategic conversations about the future – about what might unfold differently from business-as-usual. Scenarios can also help identify indicators for assessing our external environment and recognising how the environment and society might evolve. Finally, scenarios assess the robustness of strategic responses to risk. Climate scenarios are hypothetical representations of possible future climate conditions based on different sets of assumptions about variables such as greenhouse gas emissions, socio-economic developments, technological advances and policy interventions.

When implementing the TCFD recommendations, Vetropack analysed several groups of climate scenarios and decided to follow the Shared Socio-economic Pathways (SSP) scenarios, as these are derived from the findings of the Intergovernmental Panel on Climate Change (IPCC) and are based on various Representative Concentration Pathways (RCPs), as they are known. At the same time, these scenarios also take socio-economic developments into account.

SSP1 The 1.5 °C pathway	SSP2 Most likely scenario	SSP5 Fossil pathway
Development of society and the environment – Greenhouse gas emissions are significantly reduced, global warming remains limited to less than 1.5°C – Global promotion of sustainable development – Global cooperation supports adaptation to climate change and implementation of mitigation measures – Planetary boundaries are respected – Low material consumption, low energy intensity, responsible use of natural resources, circular economy	Development of society and the environment – Greenhouse gas emissions will peak in 2040 and halve by 2100, global warming is likely to range between 2°C and 3°C – Environmental systems experience degradation, with some improvements – Inequality between countries – Slight decline in resource and energy consumption	Development of society and the environment – Greenhouse gas emissions keep rising until 2100, global warming exceeds 3°C or 4°C – Severe challenges for adaptation and climate protection measures – Environmental degradation due to exploitation of natural resources and intensive use of fossil energy
Impact on Vetropack – Strong cooperation (e.g. FEVE, IPGR) to implement measures for adapting to and mitigating climate change – European ESG regulations in force – Produce and use renewable energy – Technological innovations – Societal awareness of glass collection – Glass packaging as a key contributor to the circular economy – Physical risks decrease – Transition risks increase	Impact on Vetropack – More scope for brand identity, fewer standardisation requirements in focus – Rightweighting – Glass recycling and single–use packaging – Physical risks increase slightly and affect Vetropack’s business success – Transition risks increase slightly	Impact on Vetropack – Very little political pressure regarding reusable packaging and climate protection – Low glass collection rates – Supply chain and operational disruptions due to physical risks – Investments in renewable energies and technologies do not translate into market advantage. – Physical risks increase – Transition risks decrease

We assume that in a 1.5°C scenario, single-use packaging and plastic packaging will be banned and lightweight reusable packaging solutions will become the standard, with customers and consumers preferring glass packaging and particularly innovative lightweight reusable solutions. We also expect that in a 1.5°C scenario, the development of innovative furnaces that favour low-emission technology will be rapid, helping the entire glass packaging industry to switch to low-emission glass manufacturing processes. Rising fossil fuel prices and high carbon taxes could expose us to financial risks in a 1.5 °C scenario. We are therefore reducing these risks by implementing our decarbonisation roadmap. On the other hand, the impact of physical risks will decrease sharply in the 1.5°C scenario.

However, if policymakers, society and economies do not implement effective climate protection measures, causing temperatures to rise worldwide, the impact of transition risks will decrease while the impact of physical risks will be severe. In the fossil fuel scenario, supply chain and operational disruptions would be the order of the day. Society would lack any interest in reusable packaging and the glass collection rate would be low because the glass would be disposed of and incinerated.

Risk management

Vetropack’s risk matrix is updated on a yearly basis. Our Risk Manager has primary responsibility for identifying the company’s risks. Vetropack classifies its risks in four categories: financial risks, strategic risks, operational risks and organisational risks. Risks are assessed according to their impact and their probability, adding up to a risk level on a three-point scale.

As Vetropack integrates sustainability-related risks into the company’s risk management, close collaboration is in place between the Risk Manager and the Group Sustainability Manager. The Extended Management Board validates the Risk Manager’s preliminary work and finalises the risk matrix. Mitigation and adaptation measures for each risk are defined in conjunction with the risk assessment. Vetropack’s Board of Directors ultimately approves the risk matrix.

In 2023, our Board of Directors approved the roadmap for the systematic integration of climate-related risks and opportunities into our risk management. Then in 2024, Vetropack undertook a comprehensive identification of potential climate-related risks and opportunities. The starting point was an in-depth analysis of the current risks regarding climate-related aspects. Several workshops were organised for this purpose, involving people from various departments such as Legal and Compliance and Sustainability. We conducted a benchmarking exercise with our peers, and taking the TCFD framework into account. After drawing up a list of potential risks and opportunities, we assessed them on the basis of our current risk classification scheme. Some of the potential risks were rated as very low, so they were not examined in more detail. At workshops attended by various Vetropack experts, we then established where risks and opportunities are most likely to arise in our value chain and determined the timeframes for their expected occurrence. We also assessed the financial and strategic impacts of the risks and opportunities on our strategy and planning.

Metrics and targets

Metrics

In our Climate protection material topic, we provide in-depth information on our decarbonisation roadmap, including current and planned greenhouse gas emission reduction measures aligned with the SBTi. The development of our climate-related metrics is also presented in that section.

Targets

Climate protection is an integral element of Vetropack's Clearly sustainable strategic pillar. We joined the Science Based Targets initiative (SBTi) in 2022 and submitted our climate targets to the SBTi at the beginning of 2024. The targets were validated in August 2024 and published on the official website in September 2024. The emission reduction targets are explained in detail in the transition plan contained in this report, and in the Climate protection section.

Stakeholders

Sustainability