Material impacts, risks and opportunities

Double Materiality Assessment - Process to identify and assess material impacts, risks and opportunities (IRO-1)

Epiroc has conducted a Double Materiality Assessment (DMA) according to the criteria in ESRS 1. The DMA combines Epiroc's impact on people or the environment and financial risks and opportunities that sustainability matters can have on Epiroc. The process contains six steps and has not changed compared to prior reporting period. 

1. Definition of the scope of ESG matters

During the first step Epiroc’s value chain was mapped, and research was conducted on relevant sustainability topics for the company, its value chain, and industry. Our main input parameters included previous materiality assessments, Epiroc’s enterprise risk assessment process, internal due diligence processes and strategic plans, environmental assessments, internally reported social and environmental data as well as insight from analyzing industry peers and future trends, ESG ratings, risk data from external risk tools and sustainability assessments from investors. We rely on industrywide value chain assessments, industry knowledge, and internal knowledge based on our engagement in various forums. The assessment covered Epiroc’s own operations as well as our upstream and downstream value chain. Geographically, the scope was global, with a focus on regions where we have a large presence in terms of employees, suppliers and customers, while also considering areas with heightened risks of human rights violations or weaker environmental standards. After excluding irrelevant topics a comprehensive list of relevant sustainability matters was established.

2. Initial identification of IROs 

As a second step, workshops were held with internal experts from all relevant functions to identify actual and potential IROs based on our value chain’s activities and dependencies. Dependencies include, for example, reliance on natural resources, workforce, technological development and relationships with stakeholders. The interests and perspectives of our stakeholders were incorporated into the process by the internal experts based on their insights from stakeholder engagements. Each workshop group first discussed negative and positive impacts of each sustainability matter. In a second step, they identified risks and opportunities based on the identified impacts. 

3. Ranking of material topics

Third, the identified IROs were ranked by internal sustainability experts, representatives from divisional management and Group Management. Positive impacts were assessed based on scale and scope, while negative impacts were assessed based on severity (consisting of scope, irremediable character, and scale). Scope considered how widespread the impact is, ranging from local or sporadic to global or systemic. Scale considered how grave or beneficial the impact is. Scale of negative impacts on people range from incident/accident to loss of life or sporadic minor breaches to systemic breaches. For potential impacts, likelihood was also assessed using the same methodology as for risks and opportunities. For human rights impacts, severity took priority over likelihood. The assessment of impacts draws on both internal data and external sources like academic research and industry analyses. 

Risks and opportunities were assessed based on their magnitude and likelihood of occurrence. Magnitude considers factors such as hindrance to, or acceleration of, growth and profitability. The assessment is aligned with the Group’s risk management framework, ensuring that sustainability considerations are integrated into overall risk prioritization. The enterprise risk assessment evaluates various dimensions, including financial, operational, reputational and compliance risks, allowing sustainability risks to be compared and weighted against other risks. The evaluation of magnitude ranges from low to critical and is guided by different thresholds for financial loss, loss of reputation and compliance breaches. Likelihood is evaluated on a scale from unlikely to almost certain considering both timeframe and frequency. 

A numerical scale between 1-8 was used to quantify materiality, however, when determining materiality, qualitative and varying degrees of subjective judgement was used. Impacts, risks and opportunities with a score of 4.5 and above were considered material for reporting purposes and subject to disclosure. 

The time horizons considered were short-term (within the financial year), medium-term (1-5 years), and long-term (beyond 5 years). 

4. Validation with key internal stakeholders

The outcome was discussed and analyzed together with internal subject matter experts and members of management to refine and validate the result.

5. Review and approval of first DMA 

The final outcome of the first DMA in 2024 was approved by Group Management and Audit Committee.

6. Yearly review

The result of the materiality assessment is reviewed annually to establish if the assessment is still valid or if there have been any substantial changes that would call for a reassessment, in whole or in part. If the review concludes that a reassessment should be done, it follows the methodology in the steps above. In 2025, the yearly review examined changes in business operations, such as mergers & acquisitions, entering or exiting markets, new sectors or changes in substantial business relationships, as well as geopolitical changes or changes in policy, law, conventions, scientific evidence or new data/information that could impact the materiality assessment.

The validation and reassessment was endorsed by Group Management and Audit Committee, and approved by the Board. 

Result of the double materiality assessment (IRO-2)

The double materiality assessment resulted in the IROs outlined in each section. Following the completion of the DMA, the IROs was mapped to the disclosure requirements and data points within the ESRS adhering to the topical standards and material sub-topics below. The disclosed information is assessed as material based on its relevance for managing material IROs and its importance to stakeholders understanding of the matter. If a specific requirement was not found to align with a material IRO, the related data point or disclosure requirement has not been disclosed.

Changes in material matters compared with previous reporting periods

The validation of the materiality assessment for 2025 led to a reassessment of the following sustainability matters. IROs for water was deemed under the materiality threshold, see below. Energy consumption and waste in own operations were added as material impacts. It was also clarified that use of Substances of Concern and of Substances of Very High Concerns are material in the value chain but not in own operations. 

Selected matters not considered material

Epiroc’s materiality assessment is regularly revisited. Below, we provide explanations for three sustainability matters that have been assessed as non-material this year.

Biodiversity

The most significant biodiversity impact linked to Epiroc’s value chain stems from the activities of our customers and to some extent suppliers further up the supply chain, particularly related to mine openings. Although selling mining equipment does indirectly contribute to biodiversity impacts, the major effects come from mining operations. Since our products and operations have minimal influence on decisions regarding mine openings or closures, our direct impact on biodiversity is assessed as low. Consequently, we assess our impact on biodiversity as medium and not material. We recognize the importance of continuing to monitor and expand our understanding of this topic moving forward. We continue to work with solutions that lead to less impact on biodiversity for our customers, such as our automation solutions that help with more precise drilling.

Climate change adaptation

Epiroc views impacts on climate change adaptation as supporting or preventing adaptation efforts—areas deemed less relevant for our operations.

From a financial perspective, climate adaptation is primarily seen as being impacted by physical risks, while transition risks is reported under the broader ‘climate change’ sub-topic. To identify climate adaptation-related IROs, we used insight from our qualitative scenario assessment in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which identified some long-term physical risks. In the DMA, those risks were evaluated considering Epiroc’s diversified supply chain and the location of major production sites in low-risk areas. Altogether the financial impact was not considered significant enough to be material.

Water

Epiroc’s use of water in own operation is low and primarily used for sanitation. Water dependency for production purposes is in general low and risk of financial effects due to water scarcity is low even if they exist in certain locations. Selected water withdrawals in water-stressed areas are monitored throughout the Group. For more information on water use in own operations see www.epirocgroup.com/en/sustainability.

The most significant water impacts linked to Epiroc’s value chain stem from the activities of our customers and to some extent suppliers further up the supply chain. Mining operations have significant impacts on several water issues like high water consumption, risk of pollution of water and could affect access to water for surrounding communities. Since our products and operations have minimal influence on decisions regarding mining operations, our direct impact on water is assessed as low. However, if water issues are not managed properly, it could hinder mining operations and influence customers license to operate. Epiroc is therefore exposed to the general industry risks associated with water in mining. At this point, risks are not assessed as material, but they could increase in the long-term. We continue to work with solutions that lead to lower water use for our customers.