Climate change impacts, risks and opportunities (SBM-1, IRO-1)
The assessment of material climate-related impacts was based on our value chain carbon footprint analysis from 2021 and latest emissions data. Our climate change resilience analysis conducted in 2021 included a qualitative scenario assessment for physical and transition climate-related risks and opportunities across the value chain. Climate-related risks, such as physical risks for own operations or in relation to suppliers, or transition risks connected to products, are assessed at the divisional level and are, if deemed relevant, included in the annual Enterprise Risk Management process. An aggregated analysis of the identified risks is presented to Group Management annually.
The results of the identified climate risks and opportunities from these analyses were incorporated into our Double Materiality Assessment.
Climate change resilience analysis
During 2021, a qualitative scenario assessment was performed for physical and transitional climate-related risks and opportunities in short- (5-10 years), medium- (10-30 years) and long-term (30-50 years) time horizons. A physical and transition risk mapping and scenario analysis was conducted in line with the Taskforce for Climate-related Financial Disclosures recommendations, to explore the potential future states and their impacts. Physical climate risks arise from physical events, and transition risks result from changes arising from society adapting to a low-carbon economy. The results of this qualitative scenario assessment are considered relevant and reflect a range of risks and uncertainties that could reasonably affect our operations over the assessed time horizons, as they are based on scientific understanding and relevant industry data.
The physical risk mapping of Epiroc’s production facilities, distribution centers, and significant suppliers was conducted using an external climate risk tool that categorizes risks associated with specific geographical locations. The following physical risk factors were used:
- Acute physical risks: coastal flood hazard, drought hazard, extra-tropical cyclone hazard, flood hazard, landslide hazard, severe storm hazard, tropical storm and cyclone hazard, and wildfire hazard.
- Chronic physical risks: climate change exposure, cooling degree days, heating degree days, heat stress, sea level rise, climate model uncertainty, and water stress.
These risks were linked to our operations and our significant suppliers’ operations, to identify potential impacts. The data and risk mapping was also used to analyze how physical climate risks might affect the end market and aftermarket services. Based on the physical risk mapping, identified risks were prioritized, partly by using climate scenarios. A physical risk scenario from the International Panel for Climate Change (IPCC) was combined with input from several transition scenarios, to predict the development of transition risks in short-, medium- and long-term time horizons. Transition risks in the risk tool included:
- CO2e emissions from energy use
- CO2e emissions from land use change and forestry
- Carbon policy
- GHG targets
- Low-carbon economy
- Total GHG emissions
The resilience analysis includes uncertainties related to climate projections, regulatory developments, and market dynamics. Epiroc monitors these factors continuously and adapts its strategy and business model as needed, integrating climate considerations into investment decisions, innovation, and supply chain management.
In 2025, a revalidation assessment of the qualitative climate scenario risk and resilience analysis was conducted. The assessment examined any significant changes in business operations, such as mergers and acquisitions, entering or exiting markets, as well as geopolitical changes or changes in policy, law, or new data/information that could impact the analysis. The assessment concluded that no substantial new factors have materially impacted Epiroc’s climate scenario risk and resilience analysis. Our climate scenario risk and resilience analysis disclosures will be further developed in the coming years.
Physical risks
Physical risks affecting suppliers or Epiroc’s own operations, were identified as risks in a Business-As-Usual scenario by the IPCC (RCP 8.5 scenario), which would deliver a temperature increase of 4–5 degrees. The scenario includes severe physical impacts and increased frequency if the measures to prevent further climate change remain ineffective. One potential risk is difficulties reaching customer sites for our service personnel due to an extreme weather event. However, our service personnel are located at or close to customer sites, and the risk is viewed as limited. Another risk is supply interruptions, which could arise from shortages of raw materials and weather conditions affecting products or shipments, transportation disruptions or other factors beyond Epiroc’s control. However, the impact for Epiroc is considered low due to possible mitigation measures, such as reducing single-supplier dependency, and strategic location of production facilities, distribution centers and suppliers.
Transition risks
For transitional risks the IPCC (RCP 2.6 scenario): Global warming of 1.5 degrees, Greenpeace Advanced Energy Revolutions and the IEA World Energy Outlook scenarios to 2040, among others, were used. One identified risk is reputational risk arising from Epiroc’s ties to the mining industry, which is often seen as a high-risk industry in terms of climate and the environment. At the same time, it is important to remember that the mining industry and access to minerals such as copper will play a key role in the green transition. A stress test based on a 1.5-degree transition scenario, where several regulatory requirements are implemented to reduce emissions and to reach net-zero objectives, showed that coal mining could face higher carbon taxes or operating restrictions. Read about Epiroc’s exposure to coal, which is non-significant, under the section Oil, Coal and Gas exposure in Transition plan.
Another risk connected to technology and product development is failure to develop new products or respond to technological development and customer demand for sustainable products. This could lead to substitution of existing Epiroc products and services with less emitting options from competitors. However, this risk is limited by Epiroc’s strategic focus on innovation, digitalization, automation and electrification, as well as embracing new business opportunities.
Climate-related opportunities
The transition to a low-carbon economy presents significant climate-related business opportunities for Epiroc, as the mining and infrastructure industries are needed for this transition. Growing demand for sustainable infrastructure and electrification is driving increased demand for minerals such as copper, zinc and nickel, which account for a large part of Epiroc’s revenues.
Epiroc continues to invest in R&D, acquisitions and partnerships to safeguard our position and to support customers’ efforts to lower their emissions. Expected increased demand from customers for solutions with lower environmental impact, e.g., for battery-electric equipment and automation, aligns with Epiroc’s leading position in electrification and automation, positioning us for growth in this area.
In preparation of the Group’s financial statements, climate-related considerations have been applied. See Note 2 Critical accounting estimates and judgments.
Material impacts, risks and opportunities
|
CO2e emissions in own operations |
Location in value chain | Time horizon | |||||
| Up- stream | Own operations | Down- stream | Short- term | Medium- term | Long- term | ||
| CO2e emissions and energy consumption in own operations (Scope 1 and 2) | Actual negative impact | o | o | o | o | ||
CO2e emissions from our operations, mainly from our production facilities and company vehicles, contribute to the global warming. Although these emissions represent less than 1% of our total value chain carbon footprint, reducing them is important as only we can address them directly. This is why we have implemented initiatives such as our energy efficiency program and company vehicles program. Prioritizing access to renewable energy is an important consideration when selecting operational locations. A challenge is the unavailability of renewable electricity in certain geographies. We address this through initiatives such as increased energy efficiency in our processes and solar panel installations. This is also a way for us to contribute to the increasing need for renewable electricity.
| CO2e emissions from purchased goods and services and transportation | Location in value chain | Time horizon | |||||
| Up- stream | Own operations | Down- stream | Short- term | Medium- term | Long- term | ||
| CO2e emissions from purchased goods and services (Scope 3) | Actual negative impact | o | o | o | o | ||
| CO2e emissions from upstream and downstream transportation (Scope 3) | Actual negative impact | o | o | o | o | o | |
CO2e emissions from purchased goods and services represent a large portion of our total value chain carbon footprint. We have identified the relatively few suppliers that account for most of the emissions. The top emitting categories are raw material, weldments, hydraulics and powertrains. We gather input from our suppliers about their plans to achieve CO2e emissions reductions and Paris Agreement goals. Preference is given to those engaged in the SBTi. Partnerships and collaborations with suppliers are also important to us.
Another part of our total value chain carbon footprint comes from the transportation of materials and components to our facilities, and the delivery of finished products and spare parts to customers. These transports include third-party transportation of goods by air, sea, train and road. Examples of how we have reduced these CO2e emissions include establishment of regional distribution centers and an ongoing shift from air to sea freight. We also expect freight companies to transition to lower-emission options and rely on their continued progress.
| CO2e emissions in customer operations | Location in value chain | Time horizon | |||||
| Up- stream | Own operations | Down- stream | Short- term | Medium- term | Long- term | ||
| CO2e emissions from the use phase of sold products (Scope 3) | Actual negative impact | o | o | o | o | ||
| Failure to innovate emissions-free and energy-efficient solutions can risk market share loss | Transition risk | o | o | o | o | ||
| Customers' climate ambitions can drive demand for products that are electric and energy-efficient, and have lower embodied emissions | Opportunity | o | o | o | o | o | |
| Customer caution in investing in electrification can reduce demand for battery/electric products | Transition risk | o | o | o | o | ||
The majority of our CO2e emissions occur in the use phase of our sold products. This includes total expected lifetime emissions of sold products at our customers’ operation sites from all relevant products sold in the reporting year. We are contributing to these CO2e emissions by selling the products to the customers, but we are also enabling reduction of these emissions through our product offering and by engaging with customers.
Our customers’ goals for CO2e emission reduction and healthier workplaces are expected to drive demand for our emissions-free (see definition in CO2e emissions from use of sold products (scope 3)) as well as our energy-efficient products and connected solutions, especially in regions with stringent regulations. However, failing to meet customer demand and expectations for these products could lead to loss of market share and result in lower revenue and profitability. Epiroc continues to invest significantly in R&D, acquisitions, and partnerships to support customers’ climate goals. This can differentiate us in the market, strengthen customer relationships through alignment with their decarbonization goals, diversify revenue streams and increase revenue growth. At the same time, there is a risk that some customers’ ambitions may not be put into action or not at the pace expected, which could result in our products not being prioritized. Delays and uncertainties in regulations from governmental bodies, investments needed in electric infrastructure, and limited access to renewable electricity could hinder customers' willingness to invest. Financial implications include potential revenue loss and increased customer support costs.
In the long-term, customers will likely expand their focus to Scope 3 emissions on their path to reaching net-zero. This will increase the demand for capital equipment with lower embodied emissions, for example equipment produced with less carbon-intensive steel. Product offerings with lower embodied emissions, can position Epiroc as a preferred supplier, driving market growth and new business opportunities. Our 2030 climate goal to halve CO2e emissions from relevant suppliers and planned actions to meet this goal are contributing to lower embodied emissions in our products.
| Transition to a low carbon economy, energy prices and failure to achieve climate goals | Location in value chain | Time horizon | |||||
| Up- stream | Own operations | Down- stream | Short- term | Medium- term | Long- term | ||
| Transition to a low-carbon economy can increase demand for key minerals | Opportunity | o | o | o | o | ||
| Increased energy prices as a result of geopolitical events can affect Epiroc's profitability | Risk | o | o | o | o | o | o |
| Failure to achieve 2030 goals can harm Epiroc’s reputation | Transition risk | o | o | o | o | o | |
The transition to a low-carbon economy requires sustainable infrastructure and electrification, which in turn drives the demand for minerals like copper, zinc, and nickel, which are essential for electrification technologies. Our customers in the mining industry play a vital role in supplying these metals and minerals, and our products and services help extract them. By capitalizing on this transition, there is potential for higher sales volumes.
Geopolitical events can disrupt energy supplies and international trade. Increased energy prices would have an impact across operations and the value chain, affecting energy-intensive assets, fossil fuel inputs, and electricity prices. This would result in higher costs for transportation, materials, components, and our own production and service operations. Within our Equipment & Service business area, the main risk is higher material and component prices. The Tools & Attachments business area, with a more energy-intensive production, faces the risk of increased production cost. Both Business Areas are exposed to the risk of higher costs for transportation. We are investing in renewable energy, from the grid and on-site, and energy efficiency measures to reduce fossil fuel reliance. The actual and potential availability of renewable energy and cost of energy are considered when choosing locations for new production sites.
In 2020, we set ambitious long-term climate goals to halve emissions from operations, transport, products sold and relevant suppliers in 2030 compared with the 2019 base year. Failing to achieve these goals can harm Epiroc’s reputation and negatively impact investors’ and other stakeholders’ view of us as a company. To address this risk, we continue taking actions, tracking our progress, and maintaining transparent reporting to stakeholders. If this risk materializes, it will necessitate a strategic realignment, with a heightened prioritization of our emission reduction efforts.