Climate change
For Electrolux, risks relating to climate change concern legislation regarding energy-efficient products, and reducing the climate impact of manufacturing and operations as well as increased energy pricing.
It is currently difficult to identify the physical risks posed directly by climate change. However, Electrolux estimates that Group operations are not unusually exposed to storms, rising waters or changes in temperature.
Climate change is a risk to society as a whole. Like in all industries, climate change will require appliance manufacturers to rethink their production processes and their product offering. The Group’s long-term challenge is to meet the exponential growth of the middle class while generating dramatically less carbon emissions and saving more resources. The Group’s biggest contribution to the solution is to design products that reduce total emissions, also in expanding markets such as Asia and Latin America.
Overall, Electrolux uses a materiality process to help measure priorities amongst stakeholders. Climate change and energy efficiency topped the issues most relevant to the business. Through dialog with stakeholders such as WWF, academic institutions and thought-leaders, Electrolux better understands shifts in stakeholder demands and the latest developments.
The three-part climate strategy and Environmental Policy encapsulate the Group’s response to measuring the risks and opportunities associated with climate change.
Regulatory risk
Electrolux requires that its products fulfil and exceed all regulatory limits.
In Europe, minimum efficiency-performance standards (MEPS) and other environmental requirements were in effect in 2010 for dishwashers, washing machines, refrigerators and freezers. Revised rules for energy labelling were also launched in the EU during 2010. These changes in legislation and the need to modify products could potentially have a material impact on Electrolux. However, their financial implications have not been quantitatively collated on Group level.
In the long term, Electrolux is preparing worldwide for more stringent rules for energy labelling and producer responsibility for the recycling of appliances (including a revised EU WEEE Directive). Future regulation may also include fluorinated gases used as foam-blowing agents and refrigerants presently used in some products, due to their global warming potential.
Legislation in regards to managing chemicals use and the registration of the types of chemicals used in manufacturing are also increasing, led by EU legislation RoHS (Restriction of Hazardous Substances). Electrolux annually revises its RML (Restricted Materials List) in order to stay ahead and better harmonize the response to chemicals legislation worldwide.
REACH is an EU regulation for the registration, evaluation, authorization and restriction of chemicals. Electrolux sees REACH as a tool for ensuring safe products, safe production and environmental protection. In 2007, Electrolux in Europe established a central chemical office to effectively manage the implementation of the REACH directive.
Reputational risk
The actions of any supplier, employee or operation have the potential to positively or negatively impact stakeholders’ perception of Electrolux. Moreover, company management of its workplace, particularly the health and safety of its employees and a strong sense of personal and company accountability also boosts morale and improves the employee brand.
A strong values-based corporate culture, an approach based on openness and transparency in reporting on key challenges and risks and forward-thinking supply chain management are all designed to address reputational risk.
Electrolux has a Code of Ethics and many other policies related to ethical conduct on topics such as bribery and corruption, anti-trust, workplace conduct, environment and conflicts of interest. Several tools, including an intranet site, mandatory training, and a compliance hotline, operated by a third party that is anonymous and confidential, help reinforce a strong values-based culture.
In an era of retailer consolidation, Electrolux has fewer and more powerful customers. Their expectations for transparency and sustainable product offerings are on the rise and have growing impact on the Group’s position as a preferred supplier. Strong relationships with customers can be in part contributed to the Group’s proactive environmental performance, social engagement and energy-smart products.
Shift to low cost countries
Due diligence and supply chain monitoring that also monitor non-compliances for environmental, human rights, labor practice and corruption, help the Group better understand risks of operating and sourcing in low-cost countries. A risk-based approach also informs training and monitoring activities in other, already ongoing operations. During 2011, Electrolux will finalize an acquisition of operations in the Ukraine.
The restructuring strategy also has the potential of impacting both individuals and local communities during closures. Managing closures by being transparent and inclusive is therefore key to strengthening the Group’s reputation for corporate citizenship.
Raw materials
From minerals to oil, raw material will become an increasingly costly commodity. The first impact of increased demand is likely to be price increases, along with pressure for greater efficiency, materials substitution, greater recycling and reuse impacting product affordability. The Group’s exposure to raw materials comprises mainly steel, plastics, copper and aluminium.
Precautionary principle
As a signatory of the UN Global Compact, Electrolux endorses Principles seven: Business should support a precautionary approach to environmental challenges.
The Precautionary Principle is applied to tackling climate change and chemicals use. Also, through the Group's risk-based approach, Electrolux applies a similar approach in responsible sourcing and compliance with the Workplace Code of Conduct. Electrolux supports the defintion of the Precautionary Principle as stated in the 1998 Wingspread Statement: "When an activity raises threats of harm to human health or the environment, precautionary measures should be taken even if some cause and effect relationships are not fully established scientifcally."