Sustainability risks and opportunities
Valmet has a systematic method for regularly assessing the probability and impact of risks related to sustainability performance at Group level and also within each business line. The assessed risks are based on the Valmet’s Risk Profile, which lists company risks on the headline level. Management of sustainability risks and opportunities is integrated into the multi-disciplinary, group-wide risk management process at Valmet. This section describes Valmet’s most important sustainability risks and opportunities.
Valmet has a truly global supply chain which includes procurement from countries with different risk levels. Potential risks in the supply chain include for instance breaches to intellectual property rights and company assets, compromising human rights or labor rights, risks to occupational health and safety and causing environmental damage. Valmet’s suppliers can cause notable reputation or business risks to Valmet if they engage in such unethical behavior.
In order to effectively manage risks in the supply chain, Valmet has in place a comprehensive approach to sustainable supply chain management including a global process for supplier sustainability risk assessments, supplier self-assessments and supplier sustainability audits executed by a third party. Valmet requires all its suppliers to comply with its Sustainable Supply Chain Policy, which expects suppliers to adhere to the same high standards as Valmet does.
Valmet’s own operations
Climate change related regulation and initiatives
Climate change related risks in Valmet’s own operations relate to increased costs and administrative burden due to changes in regulations and policies in the areas of climate, energy and environment. On the other hand, they also create opportunities through increased demand for high efficient solutions based on the use of renewable raw materials.
Potential business impacts of climate change to Valmet relate to mainly to international agreements as well as initiatives under the European Energy Union. Valmet welcomes the Paris Agreement as one driver for creating demand on high efficient technologies based on the use of a renewable resource. The EU Energy Union includes several initiatives that can affect the demand for Valmet’s products, such as the revision of the Emissions Trading System (ETS), the expected Effort Sharing Decision for the non-ETS sectors and the expected Policy for Sustainable Bioenergy.
Mitigating actions include the management of the potential risks and opportunities via monitoring the political debate and decision-making processes so as to be able to adapt to and take advantage of the the changing environment. This applies both to the Valmet offer as well as to Valmet’s own operations. In the area of its own operations, Valmet is e.g. implementing a company-wide environmental efficiency program, where the target is to reduce 20 % of CO2 emissions by 2020 (baseline reference yearly average 2005-2009). In 2015, one of Valmet's production sites decreased the mean temperature in five of its production halls. The adjustments and optimizations reduced the energy consumption of the site by 600MWh annually, costing only EUR 3,000 as an investment.
Change in physical climate parameters
Due to climate change, changes in annual precipitation and extreme weather conditions are becoming more common. For example, floods or snow and ice could pose a threat to the continuity of Valmet’s operations. Valmet is managing these risks on group-level by monitoring the annual development in areas where low temperatures and large amounts of snow pose a risk, and taking necessary preventative measures with regard to production sites and equipment.
Change in raw material prices
The scarcity of raw materials, water shortage and rising energy costs could impact Valmet’s and its customers’ operations and business environments. For example, an increase in energy prices could have an impact on Valmet’s operational costs.
Health, safety and environment (HSE)
In our own operations, the greatest threats to employee health and safety such as work related illnesses, accidents and occupational wellbeing arise from a working culture where our health and safety processes are not followed and risks in the work environment are not controlled or even recognized. The greatest environmental risks relate to the use of hazardous substances and to waste handling.
We have in place a Health, Safety and Environment (HSE) policy, strategic initiatives for global HSE development, key group-wide processes such as an HSE incident management system (HSE monitor), the OHSAS 18001 health and safety and ISO 14001 environmental management systems as well as location-specific HSE action plans and permits to mitigate these risks. We focus on building a strong HSE culture, continuously improving our processes and systematically monitoring compliance with our HSE standards and procedures.
People and performance
As Valmet continues to strengthen its presence closer to its customers, especially in emerging markets, we must ensure that there are necessary competencies in place across regions. Significant competence gaps in different markets could prevent Valmet from successfully executing its strategy and maintaining customer satisfaction.
Unethical business behavior
Employee-related risks may also arise from violations to Valmet’s Code of Conduct and related principles, such as practices related to bribery and corruption, which could impact Valmet’s reputation and thus financial position.
Valmet’s services and solutions
Cost-effective sustainable solutions
Valmet’s cost-effective sustainable solutions present an opportunity for Valmet. This is because our product development focuses on creating technologies that reduce the use of energy, water and raw materials. Our comprehensive service offering increases the life cycle of our products and helps to minimize environmental impacts when our customers use our technologies.
Solutions based on renewable energy
Tightened regulations and new energy taxes and fuel taxes are viewed as an opportunity for Valmet, as they are likely to drive market demand towards solutions based on renewable energy. The use of renewable energy is increasing around the world in the aspiration to achieve climate targets, and thus our know-how in biomass- and waste-based energy solutions is a significant competitive advantage for us. Valmet´s high-end products are developed to decrease energy, water and raw materials use, reduce effluents and improve process efficiency.
Risks related to product stewardship may arise from the use of metals subject to radiation or the use of restricted materials (such as conflict materials) in Valmet’s supply chain. Product safety can also be compromised if safety instructions are disregarded. Therefore, Valmet pays careful attention to safety labelling and CE-labelling and requires its suppliers to comply with Valmet’s Sustainable Supply Policy.
Growth of emerging markets
The balance of power in the global economy is rapidly shifting away from the developed economies to, for example, the BRIC countries. Valmet aims to expand its presence in emerging markets and strengthen its presence through services growth.
Changing consumer behavior
Consumer habits are changing due to rise in living standards, especially in emerging markets. Changing consumer habits create new business opportunities for Valmet due to the pressure that increased consumption coupled with increased environmental awareness places on finding eco-efficient solutions.