3.5 Reducing emissions

Climate change is a global challenge that all companies around the world must address. This is increasingly reflected in the legal framework of all the countries in which Emmi operates. Emmi is tackling this challenge with commitment and responsibility, recognising that it is the only way to secure the company’s future.

Reporting in this section is based on the Federal Council’s Ordinance on Climate Disclosures for large Swiss companies, which has been in force since 1 January 2024, and takes into account the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

3.5.1 Governance

Governance of climate issues by the Board of Directors

Climate issues (the impact of the company’s activities on climate change, the financial risks and opportunities of climate change for the company, and appropriate measures for mitigation and change) are an integral part of the processes and decisions made by the Board of Directors. For example, they are a key element of the Emmi Group’s strategy review, risk management, due diligence in mergers and acquisitions, and the investment process.

Once a year, the Board of Directors receives a report from the Head Group Sustainability at an ordinary meeting on the performance, measures, outlook, and risks and opportunities in the area of sustainability, including climate-related matters.

In addition, once a year, the Board of Directors’ Market Committee receives a detailed update from the Head Group Sustainability on specific topics (e.g. climate issues and packaging). The task of the Committee is to conduct an in-depth analysis of the issue and to enable the Board of Directors to carry out informed decision-making.

The results of the annual risk analysis as part of the Group’s regular risk management process (including climate-related risks) are presented annually to the Audit Committee and the Board of Directors by the CEO and the Head Internal Audit. Currently, climate-related risks are managed as part of the Group’s risk management process, which includes risk mitigation measures. From 2025 onwards, each risk owner must submit a self-declaration to the Board of Directors to provide an update on the implementation status.

Management’s role in assessing and managing climate issues

Group Executive Management is responsible for comprehensively identifying and assessing risk (including climate risks). The CEO has ultimate responsibility for entries in the risk register and appoints risk owners within Group Executive Management. Risk owners can delegate risk mitigation and risk management measures but remain responsible for developing and implementing the measures. Currently, the following climate risk owners have been appointed: the Chief Supply Chain Officer (CSCO) is responsible for all matters relating to biodiversity loss, extreme weather, average temperature and water, packaging and Scope 3 emissions; the Chief Marketing Officer (CMO) is responsible for all matters relating to consumer trends; and the Chief Financial Officer (CFO) is responsible for all matters relating to Scope 1 and 2 emissions.

The Head Internal Audit coordinates the Group’s risk management process. This includes integrating the results of the risk assessment conducted by the cross-functional team of climate risk experts, which is made up of representatives from the Group Supply Chain, Internal Audit, Legal, Finance and Sustainability departments. Both the Head Group Sustainability and the Head Internal Audit provide annual reports on their assessments to the Audit Committee and the Board of Directors.

Once a year, the Head Group Sustainability briefs Group Executive Management at an ordinary meeting on sustainability performance, measures, outlook, risks and opportunities, and climate-related matters. The Emmi Group’s sustainability strategy, including all climate-related issues, is an integral part of the annual strategy review by Group Executive Management. Any extraordinary topics (e.g. procurement of green electricity) are added to the agenda of the next monthly Group Executive Management meeting by the CSCO and dealt with there.

At the operational level, climate issues are monitored by the Head Group Sustainability together with the team at Group headquarters, the local sustainability officers at the operational sites around the world and in collaboration with external partners and experts (e.g. WWF, WEF Risk Monitor).

Emmi Sustainability TCFD Governance-Modell

Emmi’s remuneration policy is generally not linked to climate issues today. Exceptions apply on a limited individual basis for the members of the Group Sustainability team, the Group Supply Chain team and for some of the Managing Directors and Executive Vice Presidents in the market regions for whom annual sustainability or climate targets are set.

Corporate governance of the Emmi Group

Risk management and internal controls

3.5.2 Strategy

Emmi contributes to greenhouse gas emissions (GHG emissions) through the use of fossil fuels in its own operations and in logistics, as well as through the use of climate-harming refrigerants (Scope 1) and through purchased energy, such as electricity and district heating (Scope 2). However, the majority (more than 90%) of GHG emissions originate from the upstream and downstream value chain, which cannot be directly influenced (Scope 3). The majority of Scope 3 GHG emissions are generated during milk production, primarily through natural processes such as the formation of methane in cows’ digestive systems. In addition, the cultivation of animal feed and the use of farmyard manure are major sources of emissions (nitrous oxide).

GHG emissions along the Emmi value chain

Around 34% of man-made GHG emissions (Crippa et al., 2021) are attributable to food production (around 4% are attributable to the dairy industry (O’Brien at al., 2014)). Pressure from various interest groups and associated reputational risks are high. New regulations and demands for measures to reduce GHG emissions also entail significant transition risks for Emmi’s business model.

The trend towards plant-based nutrition presents both opportunities and risks for Emmi. By offering suitable alternative products, it is not only possible to avoid negative effects on business success, but also to open up new, attractive business areas where applicable.

Material physical climate risks, such as warmer temperatures or water scarcity, affect the availability of the raw materials Emmi needs, such as fruit, coffee, cocoa beans and nuts. Climate change can affect milk production by changing the availability and quality of feed.

Identified climate-related long-term risks and opportunities for Emmi

An analysis of climate-related risks and opportunities in line with Emmi’s standard approach (see section “Risk management and internal controls”) has shown that currently relevant risks (with an impact of more than CHF 10 million) and opportunities for Emmi’s business are only expected in the long term (time horizon greater than ten years). For this reason, only the long-term risks and opportunities identified are described below.

To assess climate-related risks and opportunities, Emmi followed the recommendations set out by the TCFD and used both qualitative and quantitative data. Quantitative data were sourced from the Intergovernmental Panel on Climate Change (IPCC), the Wharton Research Database (WRD) and the Network for Greening the Financial System (NGFS) and focused on physical and transition risks. The WRD data were especially helpful when analysing climate risks for Emmi and comparing them with competitors and benchmarking under different scenarios. The IPCC data were used to analyse the physical risks for Emmi’s sites. The selection of interview partners for qualitative data collection and the selection of four high-risk farms for detailed analysis were based on the IPCC data, which involves examining the impacts of climate factors over time. In addition, the NGFS provided the price trajectory for carbon emissions. Emmi collected qualitative data through interviews with 21 internal and four external stakeholders and supplemented this with research on climate scenarios.

Emmi’s analysis encompassed both the supply chain and business operations. The analysis focused on milk, a critical resource for Emmi, particularly with regard to physical risks. Four key production sites were analysed for their financial importance and possible impacts of climate change in order to prioritise critical areas and operating resources.

The seven biggest long-term risks that were identified, taking into account their probability and financial impact, are as follows:

1. Increase in average temperature and water scarcity

Higher temperatures and changing precipitation patterns could lead to increasing difficulties in sourcing raw materials and operational challenges for Emmi in particular. Key risk indicators are the average temperature, precipitation levels and fluctuations, especially in milk production and prices. Emmi considers this risk to be greater in regions that experience extreme weather such as Tunisia and California. Changes in average temperature patterns have already been observed in these regions.

In certain areas, the growing season could be extended, allowing more milk to be produced or cheaper feed to be obtained. In other areas, new crops could be grown (e.g. soy). The geographical areas in which such positive impacts are possible are northern Europe and Switzerland.

2. Taxation of Scope 3 GHG emissions

The taxation of Scope 3 GHG emissions would be particularly relevant for the farmers who supply Emmi, as 80% of the emissions associated with the Group are related to the milk the company purchases. Farmers would have to pay the tax, which would increase their prices. Emmi estimates that the probability that such taxes will be introduced in the next ten years is 50%. This is particularly true in countries that have signed the Paris Agreement and are striving to achieve net zero. Taxation could lead to price increases and volume losses for Emmi. Geographically, the probability appears above average in Europe, especially in Spain, the Netherlands and Switzerland.

However, this situation could also create opportunities, especially if Emmi succeeds in further strengthening the strong and lasting relationships it has cultivated with farmers and by selecting farmers with a lower GHG footprint. If Emmi builds sustainable relationships with its farmers, this should have a positive impact on the company’s image and could attract new employees and consumers.

3. Biodiversity loss

Human activities, in particular agriculture, forestry and fishing, are one of the main causes of biodiversity loss and ecosystem degradation. This affects the stability and functionality of both climate and ecosystems and can lead to a negative feedback loop that exacerbates climate change and biodiversity loss.

Emmi has identified several direct and indirect risk factors in the upstream value chain. This includes the use of fertilisers and pesticides, which damage biodiversity by reducing pollinators and polluting soils and aquatic environments. The loss of natural habitats due to deforestation and the drainage of wetlands is also a major contributor. All countries and regions around the world are affected by biodiversity loss.

Grassland-based dairy farming in the right place and in a sustainable way presents a significant opportunity and a key lever to increase biodiversity, improve soil quality and strengthen the potential for CO₂ sequestration in the soil.

4. Consumer megatrends in plant-based nutrition

Plant-based nutrition is a trend in developed countries and high-income urban communities. This trend reflects changing expectations.

Despite these challenges, Emmi also identifies notable opportunities. The company’s ability to sustainably produce dairy products in regions and systems is a key strength that enables Emmi to positively influence consumer purchasing behaviour and maintain trust in the brand. The diversification of the Emmi portfolio with plant-based products also enables it to adapt flexibly to changing market dynamics. If carefully manufactured, these plant-based products can be a valuable addition to a balanced diet. And most recently, the last few years have shown a resurgence in the focus on natural, nutrient-dense nutrition, such as dairy products. Protein has become the world’s most important ingredient (Top 10 Trends 2024, Innova Market Insights, 2024).

Emmi is aware that both dairy products and plant-based products play a role in a sustainable and balanced food system. By focusing on responsible production practices across its portfolio, Emmi aims to ensure that all its offerings make a meaningful contribution to consumer well-being and environmental sustainability. This will enable Emmi to remain a trusted leader in the dairy industry while successfully navigating ongoing market changes.

5. Impact of extreme weather events on the supply chain

Extreme weather events such as droughts and floods, which are worsening or increasing due to climate change and rising GHG emissions, will present a challenge. They are likely to have a significant impact on Emmi’s supply chain, in particular on milk production and the availability of raw materials. Droughts in southern regions could drive up milk prices and lead to shortages as some farmers switch to drought-resistant crops to diversify their incomes. Forest fires in areas such as California and southern Europe are likely to exacerbate these challenges by driving up milk prices and disrupting production facilities.

6. Costs relating to the taxation of Scope 1 and 2 GHG emissions

Emmi estimates the probability of tax increases in the next ten years at 60%, particularly if stricter measures (Federal Act on Climate Protection Objectives, Innovation and Strengthening Energy Security [KlG]) take effect in Switzerland and gradually spread to other European countries. Geographically, European countries would therefore be most affected. There would be a risk of a competitive disadvantage if Emmi had higher GHG emissions than its competitors.

7. Packaging (plastic) – cost increase due to regulation, consumer acceptance, availability

Emmi expects new requirements for the recyclability of packaging but does not expect a total ban on plastic packaging materials. Where possible, non-recyclable packaging should be avoided and replaced with recyclable alternatives. For some plastics, the infrastructure required for this is already in place in Europe or is currently being developed. The specific requirements of each country are different, but the technology is available.

In the future, the EU will introduce a system to classify packaging on the basis of its recyclability. This will have an impact on both costs and usage permits. However, under this system, individual countries within the EU cannot (any longer) impose bans that go beyond the requirements of the Packaging and Packaging Waste Regulation (PPWR). Leading countries such as France and Belgium may therefore need to withdraw some of their stricter measures.

The company expects higher procurement costs and availability of new materials, as well as investments in state-of-the-art filling and packaging systems. In addition, there is a risk of a lack of consumer acceptance for new packaging solutions. Against this backdrop, diversifying packaging portfolios can present both a challenge and an opportunity.

Impact of the identified climate-related long-term risks on Emmi’s business model, strategy and long-term financial planning

Impact on Emmi’s products and services

In some countries, dairy products face increasing public scrutiny due to their high GHG emissions, environmental impact and animal welfare concerns. Stricter EU sustainability regulations and expected changes in Switzerland are likely to put additional pressure on Emmi, leading to higher costs. Emerging regulations include increasing mandatory quotas for recycled components and fines for non-compliance. For example, the EU Packaging and Packaging Waste Regulation requires an increase in the proportion of recycled packaging materials, which could lead to a 40% increase in costs for certain materials.

With a clear strategy and ambitious measures, Emmi can create an opportunity to differentiate its offering and gain a competitive advantage. Promoting and expanding sustainable dairy farming on grassland would enable a healthy diet for a growing population. Flexibility and adaptability in formulas and specifications enable Emmi to deal effectively with potential raw material shortages. In addition, the expansion of the proportion of dairy-free products in Emmi’s portfolio creates the opportunity to offer consumers more alternatives – an approach that is already enshrined in the company’s strategy today.

Impact on Emmi’s value chain

Climate change is expected to increase the risk of the availability of raw materials. Farmers are unlikely to be able to adapt quickly enough to changing conditions (droughts, reduced soil and animal productivity and disease), especially in Tunisia and Brazil.

Currently, regulations for Scope 3 GHG emissions are neither formalised nor largely enforced, except in a few cases such as New Zealand. However, if taxes were to be levied in other countries in the future, Emmi would have to expect substantial fees or penalties.

Greater opportunities would present themselves if Emmi was able to make its procurement function more versatile and professional, strengthen its relationships with farmers and suppliers, diversify its supplier base and improve the tracking of raw material provenance. Direct collaboration with suppliers would make the supply chain more resilient. In temperate areas such as Switzerland, the Netherlands and Wisconsin, USA, growing seasons could be prolonged, allowing for higher production of feed and grain or compensating for the negative impact of high summer temperatures.

Impact on Emmi’s business model

If Emmi does not adapt or adapts more slowly than its competitors, there is a risk that the Group will lose market share. In addition, the overall risk mitigation measures must be appropriately planned, structured and budgeted (CAPEX and OPEX).

If the opportunities are seized, Emmi could make its business more resilient and future-proof in the face of competitive pressure, as adaptation and flexibility will become mandatory in the future. A strong sustainability strategy can increase visibility and would provide action plans for all subsidiaries to implement adaptation and mitigation measures promptly.

Impact on Emmi’s investments in research and development

There is a risk that Emmi will allocate its resources to the wrong priorities and thus not invest in a future-oriented manner.

Opportunities lie in strengthening global collaboration, better aligning priorities and identifying the investments with the greatest sustainability impact. Developing products that meet consumer needs and are more climate-friendly would improve competitiveness and could consolidate Emmi’s market position. Another opportunity would be the development of flexible formulas and the ability to switch between production facilities or lines more successfully than the competition.

Financial impact of expected biodiversity loss on Emmi

Risks of biodiversity loss are likely to increase (80%) over the next ten years if current practices continue. The potential financial impact on Emmi would be significant, as this would increase raw material costs, increase production costs due to the additional use of fertilisers and pesticides, and increase water treatment and health costs.

However, the loss of biodiversity and declining yields could prompt farmers to adopt more sustainable farming methods, such as diverse crop rotation and winter greening. This could improve soil health and productivity. It could also enable Emmi to differentiate its products more effectively and be financially beneficial if consumers increasingly value products that are produced in an environmentally friendly way.

Impact on Emmi’s operations (incl. type of facilities and locations)

Certain production facilities could experience higher average temperatures and would have to be cooled more intensively, which would lead to higher energy costs. Some Emmi facilities are located in areas at risk of forest fires, which can lead to power outages, production downtime and supply chain disruptions. Some Emmi facilities are located in areas of increasing water scarcity, which can lead to production stoppages.

On the other hand, warmer and wetter winters can prolong the grazing season in some regions, which could increase milk production and reduce feeding costs (e.g. in Switzerland). One opportunity could be to relocate production facilities from less-than-optimal locations to areas with more sustainable water supplies and more appropriate weather conditions. This could offer new procurement opportunities and better availability of sustainable milk.

Impact on Emmi’s strategy regarding acquisitions or divestments

Emmi has not identified any extraordinary climate-relevant issues or risks in connection with its current mergers and acquisitions. In each case, they were comparable with the climate-relevant issues and risks already known to the Emmi Group. Emmi already takes climate issues such as GHG emissions, packaging and water into account as part of its due diligence and derives suitable measures for the respective business case and to reduce the impact.

Impact on Emmi’s access to capital

Emmi has not identified any direct risk of climate-related issues making access to capital more difficult.

Resilience test using scenario analysis

In 2022, Emmi collected extensive primary and secondary data to assess risks in terms of probability and impact for two scenarios and three different time horizons (2027, 2030 and 2050). The first scenario was based on the Paris Agreement, the second on continuity (business as usual). The result was summarised in four different matrices (see process summary in the graphic).

Scenario analysis process

Emmi has analysed the following risk categories in accordance with the TCFD recommendations: legal and regulatory risks, technology risks, market risks, reputational risks, acute physical and chronic physical risks. These risk categories were further subdivided on the basis of risk reports produced by competitors. In addition, the risks and opportunities identified by the World Business Council for Sustainable Development (WBCSD) were taken into account.

Implications of the results of the scenario analysis for Emmi’s strategy

Sustainability is an integral part of the Group strategy. The company consistently addresses both environmental risks and opportunities, including expanding its product portfolio to include milk alternatives.

The strategy comprises the following elements that can be adapted to changing and future risks.

• Switzerland’s leading milk processor: non-fulfilment of sustainability targets can lead to higher procurement costs and reputational damage for Emmi. High environmental impact would be perceived by the public. Damage to reputation could result in Emmi’s branded products being avoided, customer relationships being damaged, trust being lost, etc. These consequences would lead to negative organic growth and a decline in profitability. Increased collaboration and stronger relationships with suppliers would offer opportunities. This involves building long-term relationships to jointly manage risks and support each other in the transition to a climate-friendly economy.
• A leading innovator in niche markets: Emmi wants to differentiate itself through innovation. However, if the raw materials needed for these innovations are lacking due to changing climatic conditions (e.g. global warming), Emmi would not be able to implement the innovations at all and could undesirably distance itself from its customers and consumers. Among other measures, Emmi therefore strives to work on improving its milk alternatives so that it can offer consumers plant-based alternatives and thus diversify its business portfolio and reduce the risk of losing customers.
• Excellent in what we do: significant failure to meet climate targets would result in long-term environmental damage and could harm Emmi’s reputation. As Emmi would then no longer be perceived as responsible, it could become increasingly difficult to find and retain employees.
• Sustainability: significant non-compliance with climate targets would damage Emmi’s reputation. Emmi would not live up to its claim to be a role model when it comes to sustainability.

Potential impact of climate-related issues on Emmi’s financial performance and positioning based on the results of the scenario analysis

As part of the risk management process, the Emmi Group carries out a quantitative assessment (impact on earnings before interest and taxes, EBIT) for all identified risks in the short and medium term. In 2024, the following risks were identified with a potential impact on Emmi’s EBIT of more than CHF 10 million but less than CHF 20 million:

• consumer megatrends shifting towards green food production and sustainable nutrition
• rising average temperature and water scarcity
• biodiversity loss
• costs of taxation of Scope 3 GHG emissions

Corrective actions identified from the scenario analysis

Risk-mitigating measures have been defined for the risks identified above that have been assessed as substantial:

• Improve the resilience and flexibility of operations by creating opportunities to shift production volumes between factories.
• Strengthen the partnership with farmers (suppliers) to support them in tackling climate-related challenges and provide them with a degree of security.
• Build efficient factories in terms of water consumption, cooling, etc.
• Trace vulnerable raw materials (such as coffee, cocoa or coconuts) to prevent procuring from at-risk areas.
• Strengthen capabilities and capacities in procurement.

In order to be proactive and adaptable in the face of climate change, Emmi uses its financial resources as a tool to address new climate-related risks and opportunities. Sustainability is not only an operational issue for Emmi but also influences its financial strategy and capital allocation decisions. This includes investing in green technologies such as renewables, energy-efficient facilities and sustainable supply chain practices. Emmi recognises that financial resilience is required to deal with the potential impacts of climate change. For this reason, Emmi considers sufficient capital reserves, access to different sources of financing and the ability to adapt the capital structure, if necessary, to be crucial.

Specific corrective measures for individual risks assessed as substantial (with a potential impact on EBIT of more than CHF 10 million but less than CHF 20 million) include:

Rising average temperature and water scarcity

To support farmers in their adaptation strategies and mitigate the financial impact, increased costs will be passed on to consumers and comprehensive emission reduction strategies will be implemented. These measures aim to significantly reduce the financial impact and achieve manageable residual risk over the next decade.

Costs of taxation of Scope 3 GHG emissions

Emmi has initiated projects to measure and reduce Scope 3 GHG emissions, focusing primarily on the dairy sector and GHG emissions at the farm level in Switzerland. The findings are to be used internationally. Strategies include efficient, site-appropriate feeding and the introduction of feed additives. Despite these efforts, residual financial risk is projected, underscoring the continuing need for ongoing strategic adjustments in light of regulatory changes.

Biodiversity loss

Emmi is considering introducing a no-deforestation declaration and supporting biodiversity-friendly agricultural practices at its suppliers. These measures aim to reduce the impact on biodiversity and meet the expectations of consumers and regulators. Despite these efforts, the residual risk remains significant, indicating the need for ongoing management and adaptation strategies.

Consumer megatrends shifting towards green food production and sustainable nutrition

Emmi is diversifying its product range with milk alternatives in order to meet the needs of consumers. Emmi is also focusing on making its existing milk production processes even more sustainable by increasing efficiency and reducing the GHG footprint of its dairy operations.

Specific mitigation actions for individual additional risks (with a potential impact on EBIT of less than CHF 10 million) include:

Impact of extreme weather events on the supply chain

Emmi is focusing on improving the resilience of its supply chain through strategic procurement, supplier diversification and global crisis management training. Despite these efforts, the residual risk remains significant with an expected impact reduction of only 10%. This highlights Emmi’s ongoing vulnerability to weather extremes and underscores the need for comprehensive adaptation strategies.

Tax costs for Scope 1 and 2 GHG emissions

Emmi has initiated a comprehensive plan to reduce Scope 1 and 2 GHG emissions. This includes increasing in-house production of renewable energy, introducing new low-carbon technologies such as heat pumps and purchasing green and biogas certificates. These strategies pursue the science-based interim target of reducing GHG emissions by 60% by 2027, compared to 2014 (baseline year), as validated by the Science Based Targets Initiative (SBTi) with the goal of reaching net-zero emissions by 2050. Emmi’s financial commitment to these mitigation efforts is considerable. Although these investments are intended to reduce the potential tax impact, Emmi expects a residual risk to remain over the next decade.

Packaging (plastic) – cost increase due to regulations, consumer acceptance, availability

Emmi is currently assessing alternative packaging concepts. The company aims to switch to recycled materials and strives to achieve a stronger circular economy. These steps are likely to entail significant costs for Emmi, but they are critical in order to comply with the new regulations and ensure consumer acceptance. Some of these additional costs could be passed on to customers and consumers. Despite these efforts, residual risks remain as the regulatory environment and consumer expectations are constantly changing.

Integrating climate-related impacts, opportunities and risks into Emmi’s strategic and financial planning process

Climate issues are taken into account as standard in financial planning as part of the Group’s rolling forecasting process. This is a bottom-up process that is coordinated, analysed, consolidated and carried out for each legal entity by Group Controlling.

The Group strategy is geared towards creating long-term value. A core element is sustainability (including climate issues).

In order to monitor the reduction of GHG emissions, Emmi compiled an internal project pipeline (Sustainability Action File) in 2023, which is maintained at Group level and updated by the responsible legal entities. The pipeline lists all possible new and ongoing projects to reduce GHG emissions while also showing historical GHG emissions. Emmi believes it is essential to measure how well targets are being met in terms of reductions and the financial impact of these projects (both in terms of costs and income). The pipeline serves as a forecasting tool for potential GHG savings in the future.

Group Executive Management continuously reviews market and product innovations in a formal meeting (Growth Council). New production processes are also being reviewed to ensure that new technologies are identified at an early stage and adopted where necessary.

Investments in a diversified packaging portfolio are essential to have different options available depending on consumer acceptance and packaging regulations.

In view of the risk of higher temperatures and water scarcity, it is important to make the formulas more resilient, for example, by switching from one ingredient to another. This is ensured through a gatekeeping process that ensures appropriate involvement of R&D, Operations and Procurement.

In order to address the risks associated with the use of plastic packaging, Emmi has undertaken to switch to recyclable and recycled packaging materials. The same process as described above is applied.

The capital management process at Emmi governs the approval of all investments. The approval document contains specific sections detailing the impact on sustainability (including climate change). Climate-related risks are therefore taken into account when assessing such investments. Depending on these assessments, certain corrective measures must be included in the investment application.

With regard to the risk of biodiversity loss, Emmi and its downstream partners in the value chain need to invest in biodiversity initiatives on farms and in research to support more sustainable milk production.

All climate issues are formally listed in detail as part of the capital approval process. A formal ESG and sustainability assessment is part of the process for all M&A activities.

Emmi’s overarching vision on climate issues

Emmi is committed to reducing GHG emissions directly and along its value chain. This applies in particular to dairy farming, the production of other agricultural raw materials, trading, consumers, waste disposal and all transportation between the different entities in the value chain. The most relevant greenhouse gases in this context are carbon dioxide (CO₂), methane (CH4) and nitrous oxide (N2O). However, Emmi includes all relevant greenhouse gases in its calculations, including coolants.

Emmi aims to reduce its direct GHG emissions by 60% (Scope 1 and 2) by 2027 compared to 2014 (in line with the Emmi science-based interim reduction target validated by the Science Based Targets initiative (SBTi)). To achieve this, Emmi continues to use energy analyses and reduction measures. Emmi aims to meet an increasing portion of its remaining energy requirements with alternative energy sources.

The company is extending its commitment to the entire value chain (Scope 3) and is also setting itself science-based targets in this regard (SBTi). Together with milk producers, Emmi aims to reduce GHG emissions by 25% per kg milk (by 2027 compared to 2019).

Emmi aims to halve waste (Emmi Group) and food waste (division Switzerland) across its operations between 2017 and 2027. By 2027 at the latest, any remaining waste should no longer be allowed to go into landfill. Emmi aims to make its product packaging 100% recyclable by 2027, use at least 30% recycled materials and avoid single-use plastic.

In terms of water, Emmi is focusing its efforts on arid risk zones, where it is committed to reducing freshwater consumption (withdrawal) by its facilities by 50% by 2027 (compared to consumption in 2019). In all other countries, Emmi aims to achieve a reduction of 15% (compared to 2019).

In summary, Emmi aims to reduce its negative impact and strengthen and expand its positive impact. Emmi strives to achieve a circular economy and aims to be a role model in terms of sustainability overall.

Emmi’s transition plan for Scope 1 and 2 GHG emissions

The key elements of Emmi’s transition plan are as follows:

• improve energy efficiency
• convert selected large production facilities to renewable energies (heat)
• switch to 100% green electricity
• replace climate-harming coolants
• convert the fleet to alternative technologies (e.g. hydrogen, electricity)

To improve energy efficiency, Emmi uses technologies such as state-of-the-art pumps, engines and heat recovery processes. In terms of the supply of process heat, Emmi is adhering to its decision to no longer invest in plants based on fossil fuels.

Replacing fossil fuels with renewable alternatives and optimising processes are further levers for reducing Emmi’s direct GHG emissions. District heating, solar energy (especially on the roofs of the company’s own production facilities), heat pumps (powered by green electricity) and wood have proven to be alternative energy sources.

Emmi promotes its own production of renewable electricity and heat. By 2025, the company aims to meet at least 4% of its global electricity consumption with solar power generated in-house.

Emmi purchases renewable energy for its electricity supply in the form of green electricity certificates. In Switzerland and Europe, the company uses hydropower wherever possible. In Brazil and in Chile Emmi uses wind power generated in Brazil. In Mexico hydropower generated in Guatemala is used, whereas in the USA locally generated hydropower is used. At the production site in Tunisia, almost all of its electricity is now generated in-house by gas turbines due to a lack of security of supply. There is no biogas or solar technology in Tunisia, so there are currently no lower-emission alternatives.

Connecting to a district heating network is only possible for Emmi if the heat is generated from renewable energy sources or from waste heat.

Emmi’s transition plan for Scope 3 GHG emissions

Currently, 80% of Emmi’s Scope 3 GHG emissions are attributable to purchased milk. GHG emissions are highly dependent on the local situation and the production system. The range varies from very low values in grassland-based systems, such as in Switzerland, to higher values in systems with lower production, such as in Chile or some farms in Brazil. Before a proper transition plan can be defined, Emmi is therefore focusing on measuring a baseline (footprint) for all relevant regions in terms of milk volume and GHG emissions (Switzerland, Chile, Brazil). Emmi is also involved in pilot projects (e.g. KlimaStaR Milk in Switzerland) to acquire and test reduction measures and then gradually expand the projects internationally. Against this backdrop, it has proven crucial for Emmi to work with other players along the entire value chain (e.g. Klimatisch, KlimaStaR Milk.)

KlimaStaR Milk

Klimatisch industry platform

Sustainable dairy

The natural biological carbon cycle

As part of a biological cycle, cows are extremely efficient at turning grass into valuable proteins and nutrient-dense foods that humans can digest.

The methane released into the air by cows after digestion is broken down into CO₂ and water (H₂O) within ten years. Plants growing in meadows absorb both during photosynthesis and release oxygen (O₂). Cows absorb carbon from green fodder when they eat.

3.5.3 Risk management

The Emmi Group has established a risk management process that has been approved by the Board of Directors. The Risk Management Guidelines define the structured process for systematically identifying, analysing and evaluating relevant risks (including climate-related risks). Risks are assessed in terms of their probability of occurrence and extent. The risk management process integrates bottom-up (from local teams, experts, companies, countries) and top-down (from Board of Directors, Group Executive Management) perspectives. Short-term time horizons (3 years) and long-term time horizons (10 years) are taken into account and are reflected in the three divisions (Switzerland, Europe and Americas).

As part of this process, the identified climate-related risks and opportunities, including current and future regulatory requirements related to climate change, are discussed annually by Group Executive Management and classified according to their potential size and scope. The results of this analysis by Group Executive Management are then presented to and approved by the Board of Directors. Significant opportunities and risks are continuously monitored and, if necessary, discussed in the monthly meetings held by Group Executive Management and in the meetings held by the Board of Directors.

The risk management process is coordinated by the Head Internal Audit. Short- and long-term risks are identified, analysed and evaluated by Group Executive Management. The CEO determines the risk owners together with Group Executive Management and defines measures to mitigate the risks. Risk management is carried out actively with the relevant management teams of the Group companies and Group divisions.

Climate change currently has no impact on Emmi’s short-term risks. Nevertheless, these will be taken into account in the short term as soon as this should change. In the case of long-term risks (to which all climate-related risks have previously been assigned), these are included as business risks in strategic long-term planning.

The risk management process is led and managed by the Internal Audit department. The Group Executive Management and the Group functions (Controlling, Corporate Development, Legal Services, Sustainability) contribute to risk assessment through workshops and qualitative interviews.

Risk management and internal controls

3.5.4 Metrics, goals and measures

Addressing opportunities and risks

The following metrics are used by Emmi to assess and monitor climate-related risks and opportunities in line with the strategy and risk management process.

Methodology for non-financial figures 2024

Emmi uses an internal carbon price of CHF 120 per tonne of CO₂e in Switzerland. For the sake of simplicity, this is used for other countries to assess projects in terms of their GHG emissions (SAF list). This value is based on the CO₂ price in Switzerland (tax) that every consumer of fossil fuels has to pay. The internal CO₂ reference price embodies the reference costs for saving one tonne of CO₂e. A cost ratio (costs per tonne of CO₂e saved) is calculated for each project. This serves as a basis for decisions on investments in measures to reduce energy or GHG emissions.

Emmi collects and calculates data to achieve greater transparency regarding land use. This data will be available with the approved SBTi FLAG targets (see section “Outlook”). Waste management key figures are not considered relevant to the treatment of opportunities and risks as they represent less than 1% of the GHG footprint.

Emmi’s remuneration policy is currently not linked to climate-related issues in general. Exceptions are made at a limited personal level for the members of the Group Sustainability team, the Group Supply Chain team as well as some of the Managing Directors and Executive Vice Presidents for whom annual sustainability or climate-related targets are set.

Methodology for non-financial figures 2024

Compared to the previous year, Emmi recorded a 7% increase in Scope 1 and 2 GHG emissions.

In the year under review, Scope 1 GHG emissions increased by around 7,900 metric tons of CO₂e, which corresponds to an increase of 8% compared to the previous year. The main driver of this development is the integration of the subsidiary Emmi Dessert USA in the data collection, which generates around 4,000 tonnes of CO₂e. In addition, increased refrigerant losses – particularly at a production facility in Chile – contribute significantly to the higher emission values. To counteract the loss of refrigerants, immediate measures should be introduced at the corresponding production facilities, and the replacement of climate-harming refrigerants should be examined.

The switch from non-renewable primary energy to renewable biomass at division Americas (in Chile) leads to a reduction of around 3,800 tonnes of CO₂e in the current year. Further reductions were achieved through energy efficiency measures in Bettinehoeve (Netherlands) by using the heat emitted from the heat pump to preheat the air in one of the two milk powder drying towers. In Mahdia (Tunisia), hot water is also recovered from the cogeneration system to be used as a heat source in the fresh products plant.

In the year under review, Scope 2 GHG emissions were reduced from 3,145 to 1,876 tonnes of CO₂e, which corresponds to a reduction of around 40%. This decline is primarily attributable to measures at division Americas, particularly at the Mahdia site in Tunisia. The increased use of a cogeneration plant (gas turbine) made it possible to reduce electricity consumption from the grid. As a result, emissions were reduced and shifted from Scope 2 to Scope 1. In addition to the above-mentioned factors in the development of absolute Scope 1 and 2 GHG emissions, the current increase in GHG emissions intensity must take into account the disproportionate decline in production and thus the quantity of milk in relation to the energy saved. In addition, energy consumption tends to increase due to a higher degree of automation and, in some cases, a higher level of processing. Steps such as concentration, filtration and whey drying require significantly higher energy consumption with a lower output quantity. This trend can be counteracted by continuously implementing efficiency measures.

By 2024, Emmi was able to reduce its direct GHG emissions by 25% compared with the baseline year (2014) (target by 2027: 60%). Excluding Emmi Dessert USA (acquisition effect), the reduction compared with the baseline year would amount to 27%.

Methodology for non-financial figures 2024

Emmi has reduced its Scope 2 GHG emissions in recent years by using renewable energies at all locations worldwide (excluding Tunisia). Since 2017, the Emmi sites in Switzerland have been supplied exclusively with European hydropower (-14,800 t CO₂e per year). This was followed in 2018 by all sites in Europe (-17,000 t CO₂e per year). Since the start of 2021, 70% of the electricity required by the Group companies in North and South America has been sourced from renewable energies through certificates. This figure has risen to 100% since 2022.

The in-house production of solar power accounts for 1.2% (1.2% in the previous year) of total electricity consumption (target by 2025: 4%). In total, 3.1% (2.8% in the previous year) of renewable electricity was self-produced in 2024 (solar and biogas/gas turbine).

Above-average CDP score

Since 2017, Emmi has had its sustainability efforts assessed by the Carbon Disclosure Project (CDP). The score has improved over time and reflects how far Emmi has come on its sustainability journey. Emmi achieved a B rating for the first time in 2021 (2019: B-). With a B rating in 2023, it was above the industry average of B-.

Emmi’s Climate Action Score

Reduction of Scope 3 GHG emissions in the Emmi Group

Emmi has set itself the target of reducing the emission intensity of purchased milk (GHG emissions per kg of processed milk) in the upstream value chain by 25% by 2027 (Scope 3 – based on 2019).

For 2019, Emmi calculated a baseline value of 2.54 kg CO₂e per kg of processed milk for the entire Group using general emission factors from the database (WFLDB 3.4). This figure increased by 2% to 2.59 (total Scope 3) kg CO₂e per kg of processed milk through to 2024 (target by 2027: -25%). This increase was the result of an increase in milk quantities in countries with relatively high emission factors per kg milk, mainly Brazil and Chile.

Supply chain emissions (Scope 3) have decreased by 4% compared to the previous year. This is due to a data correction in the milk volume in the division Americas (Chile).

Information on measures and projects can be found in the section “Sustainable dairy”.

3.5.5 Outlook

Due to acquisitions as well as the requirements of the SBTi FLAG regulation and the deforestation criteria, a recalculation of the “baseline” and the reduction target according to the SBTi (FLAG) is planned for the coming year, as Emmi expects its emissions to deviate by more than 5%. It is planned that the most accurate and up-to-date data from 2023 will then serve as the baseline year.

As part of its strategic implementation, Emmi wants to focus even more strongly on reducing GHG emissions in the future. To this end, specific net-zero roadmaps are to be defined for all key production sites of the Emmi Group. In terms of specific measures, a biomass plant is planned in Pitrufquén (Chile) to further reduce Scope 1 GHG emissions, while the decision on the purchase of green electricity is forthcoming in Dagmersellen (Switzerland). Efficiency measures are also planned at the Etten-Leur site in the Netherlands. Heat pump testing is planned in Pamplona, Spain, and at the plants in Italy. In addition, the company’s own photovoltaic capacities for generating green electricity are to be expanded. In Switzerland, a gradual conversion of the vehicle fleet to electric vehicles is also planned.