The Vitec Group plc has complied with the requirements of Listing Rules 9.8.6R by including climate-related financial disclosures consistent with TCFD recommendations and recommended disclosures. We will continue to develop our TCFD reporting in the 2022 Annual Report as we further embed the recommendations and latest guidance.

We recognise that climate change is a complex issue and, although our assessment that the risk to the Group’s operations is minimal, we have worked closely with an independent, specialist ESG consultancy to rigorously assess the impact of climate change on the business. In our first year of reporting, we have focused on three key areas.

  • First, we have worked to understand our Scope 3 carbon emissions to develop our 2045 net zero roadmap: net zero for Scope 1 and 2 by 2035, and 2045 for Scope 3.
  • Second, we have created a climate risk management framework incorporating climate-related scenarios to assess climate change’s potential risks and opportunities on our business, strategy and financial planning.
  • Third, we have introduced robust governance processes to mitigate the risks and capitalise on the opportunities climate change presents.

Governance – Ensuring accountability and responsibility for climate-related risks and opportunitiesplus

The Board provides oversight to climate-related risks and opportunities which have been integrated into the business strategy and business targets. The Audit Committee reviews financial and non-financial risks outlined in the Group Risk Register, including the Climate Change Principal Risk. The Group Risk Assurance Manager, Group Company Secretary and Deputy Group Finance Director work with third-party experts to assess the potential climate-related risks for the short, medium and long term to annually review the Climate Change Principal Risk criteria. The responsibility for managing Vitec’s climate-related risks and opportunities is assigned between Divisional CEOs, Operations Directors, Group Risk Assurance Manager and the Group Company Secretary. The Group Risk Assurance Manager coordinates the work between the ESG Committee and Divisional management across the business to ensure that climate risks and opportunities are identified, the potential impacts are accurately reported, and risk mitigation measures are adopted. The Group Risk Assurance Manager regularly reviews mitigation plans on behalf of the ESG Committee and provides annual updates on climate-related issues to Group operations. Further details on how TCFD is managed at Group and in key markets is available in our standalone TCFD Report.

Several sessions were facilitated by the aforementioned third-party expert, to explain and raise awareness of the concepts of climate change. These sessions have involved the Board and senior management. In addition, the external auditors have provided an overview of climate change regulatory requirements to the Audit Committee.

Strategy – Building climate resilience into our business strategyplus

Vitec has an established strategy and purpose. To ensure business longevity, we have worked to understand the impact of climate change on the Group’s operations, strategy and financial planning. Adopting the TCFD recommendations within our existing risk management processes has enabled Vitec to develop a climate-risk impact framework. In 2021, a detailed climate scenario analysis was carried out across all 33 operational sites of the Group. A more comprehensive analysis was conducted for the Group’s 12 largest sites – based on revenue and employee numbers. In 2022, we aim to extend the analysis to our key supply chain routes. The findings of the climate scenario analysis were presented to the Group Risk Assurance Manager, ESG Committee members and site managers to assess and appropriately classify the potential climate-related risks and opportunities across Vitec’s operations. The Group Risk Assurance Manager, together with the Group Finance Director, assess if the potential climate-related risks and opportunities will significantly increase the Climate Change principal risk criteria in the short, medium and long term.

To assess the impact of climate change on our organisation we consider a range of scenarios. A climate scenario is a plausible representation of future climate that has been constructed for explicit use in investigating our future exposure to the impacts of climate change. We modelled our climate scenarios across three time-horizons using several established models: Climada natural catastrophe damage model, CORDEX regional climate projections, and IAMs (Integrated Assessment Models).

Scenarios Warming Pathways Time horizons
Below 2°C Scenario – Organisations begin to align more closely with the Paris Agreement and Science Based Targets initiative (1.5°C) for an orderly and coordinated transition to a low-carbon economy. Short-term
2020-2025
Between 2-3°C Scenario – Businesses respond to patchwork policies with intermittent action, aligning with current forecasts. Medium-term
2025-2035
Above 3°C Scenario – Bank of England models a recession; minimal climate action and global emissions rise unchecked. Long-term
2035-2050

Initial risk levels were considered before determining a final risk level based on mitigating measures. The following tables summarise the risks and opportunities that were identified as material and which cumulatively results in Climate Change being reported as a principal risk. While we have identified Climate Change as a principal risk, this process has determined that Climate Change and its impact is low for the Group in the medium term, and the risk is therefore categorised as moderate overall. There is no material impact in relation to 2021.

In accordance with the 2018 UK Corporate Governance Code, the Directors have assessed the viability of the Group over a three-year period, taking account of the principal risks and uncertainties set out on pages 36 to 41 of the Annual Report which include the climate-related risk. The Directors believe that a three-year period is an appropriate period over which a reasonable expectation of the Group’s longer-term viability can be evaluated and is aligned with the Group’s business and strategic planning time horizon. The climate-related risk does not materially impact the Group’s longer-term viability assessment. The maximum annuity impact of climate change, based on the impact ranges below, was factored into the long-term financial modelling for the Group’s cash generating units (“CGUs”). There is no material impact on the available headroom.

Description Timeline Impact range Explanation
Transitional risks
Increased reporting requirements pertaining to climate change and increased resourcing for environmental initiatives. Risk is highest in the <2°C Scenario. Short/Medium/Long-term  (2020-2050) Additional cost of £0.3 – £0.7m per annum. This reflects the incremental headcount required to deliver initiatives related to climate change and reporting thereof, increased management effort, steering Group activities and third-party consulting costs. We expect additional resourcing to work with the supply chain to reduce Scope 3 (indirect) emissions.
Carbon costs associated with carbon taxes and offsetting to hit our emissions goals; costs are highest in 2-3°C Scenario, as governments may bring in carbon taxation quickly and in an unplanned way. Medium/Long-term (2025-2050) Additional cost of up to £0.3m per annum.


The additional cost is derived by reference to available carbon cost benchmarks, applied to Vitec’s projections for Scope 1 and 2 emissions over the next 15 years.

The annual charge may reach £0.3m in 2026, under the “2-3°C Scenario” assumption model as defined above, when carbon cost is projected to peak.

Mandates on, and regulation of, existing products and services such as UK plastic tax. Increased likelihood in <2°C Scenario. Short/Medium/Long-term (2020-2050) - The impact is currently negligible based on new/imminent legislation but may increase in the future as countries introduce new forms of environmental taxes.
Changing consumer preferences and increased sensitivity to ESG concerns across all scenarios. Medium/Long-term (2025-2050) - This is a significant concern; however, we believe that Vitec is well-positioned, given the initiatives already underway to improve the sustainability of Vitec’s products. No financial impact is assigned at this point. We will develop metrics to measure the relative environmental impact of different product lines.
Costs of energy and raw materials rising. Risk is variable across each Scenario. Short/Medium-term (2020-2035) - Climate change may result in increased energy and raw material cost. The impact will be offset by Vitec’s ability to pass incremental input costs onto customers and efforts to increase the use of sustainable components, improved efficiency and renewable energy. Hence no financial impact is assigned at this point.
Increased stakeholder concern damaging our reputation, risk in >3°C Scenario. Short/Medium/Long-term (2020-2025) - We do not believe there is any significant risk in respect of this. Vitec’s comprehensive ESG programme and commitment to a sustainable model mitigates this risk.
Physical risks

Increased frequency of natural disasters at critical sites, for example, California wildfires. These risks are most significant in >3°C Scenario.

This risk may also disrupt the supply chain.

Short/Medium/Long-term (2020-2050) £0.1m - £0.2m per annum (additional property and business continuity insurance cost).

Most Vitec sites are currently rated as low-risk from a climate change perspective (this will be outlined in the standalone TCFD report). This follows a rigorous assessment of the sites. The key sites are built to robust standards, often to withstand seismic pressure and climate threats.

Nonetheless, the risk of damage to property and surrounding infrastructure increases with time under the different scenarios. We mitigate this through additional site mitigation measures (e.g. improved drainage systems), business continuity plans, and global insurance for property damage and business interruption, covering loss of earnings.

We will monitor the risk rating of each site on an annual basis, where necessary, considering the options to relocate operations if necessary.

Where possible, we diversify our supplier base and source away from countries with higher risk from a climate change perspective. For example, we have in-sourced some of the production relating to JOBY. Our business is less reliant on the camera industry which has been severely impacted by natural disasters in the Far East.

Climate change is expected to result in an overall increase in insurance premiums due to increased frequency of natural disasters.

Insidious changes relating to climate change, rising as time progresses this risk is most significant in our 2-3°C and >3°C Scenario.

Medium/Long-term (2025-2050) -

Increased heatwaves may have health and safety implications and require more energy for cooling our facilities. Additional costs will be offset by increased energy efficiency and self-sufficiency.

Opportunity

Substituting existing products to lower-emission alternatives. Sustainable products have a competitive edge.

Short/Medium-term (2020-2035) -

The opportunity is not fully quantified at this point. We have already implemented some initiatives to make some of our products more sustainable which may also make these products more competitive. We will develop metrics to measure the relative environmental impact of different product lines.

Reducing cost base through initiatives to increase energy efficiency, and relocating aspects of the supply chain.

Short/Medium/Long-term (2020-2050) -

This opportunity is not fully quantified at this point, but some projects are already expected to generate a financial return. For example, the ongoing installation of solar panels in Bury St Edmunds has an associated payback period of less than five years. In-sourcing of JOBY is environmentally beneficial but also improves cost base.

Risk management – embedding climate into our risk management frameworkplus

As Climate Change is classified as a principal risk, the Board has ultimate responsibility for climate-related risks and opportunities. We have a well-established framework for assessing our risks and assigning mitigation actions from years of development in a competitive business landscape. Our climate risk management process is to identify, evaluate and address potential risks and opportunities associated with climate change to our operations.

Four interconnected steps were undertaken:

Step 1 – We identified risks through stakeholder engagement and risk workshops, involving stakeholders from the beginning to utilise their knowledge of Vitec. In total, eight climate-related risks and two opportunities were identified.

Step 2 – We assessed each risk and opportunity using our scenario analysis, accounting for the full range of each one’s potential impact. This allowed us to determine the material impact and rank each risk and opportunity.

Step 3 – Our risk management options were appraised. We recognise that all good decisions rely on the effective analysis of alternate options. A risk management response was agreed on depending on how it helped build our resilience to the climate-related issue.

Step 4 – Finally, we addressed each risk and opportunity, and controls were implemented to prevent, reduce or mitigate downside risks, or increase the likelihood of opportunities. We recognise that residual risks will remain and communicate this across the business at this stage. At a minimum, our management teams review risk exposures against business risk level tolerances annually.

Metrics and targets – measuring and managing our climate impactplus

We use a wide variety of metrics to measure climate-related impacts. These metrics consist of Vitec’s greenhouse gas inventory, including the Group’s Scope 1, 2 and 3 carbon emissions and the emissions reduction pathway shown on page 50 aligned with the Paris Agreement 1.5°C warming scenario. We have set several ambitious targets to manage climate-related risks described above (pages 53 to 56), and reduce our impact on the environment, such as becoming carbon neutral for Scope 1 and 2 by 2025, net zero for Scope 1 and 2 by 2035, and net zero for Scope 3 by 2045. Vitec’s other environmental indicators (pages 47-48) on energy efficiency measures, waste reduction, water consumption, product sustainability, and supply chain integrity contribute towards mitigating some transitional and physical risks and capitalise on the potential opportunities in substituting products to lower-emission alternatives. We will annually measure and monitor severe weather events across our sites. A percentage of the Group Chief Executive’s remuneration has been tied to the Group’s ESG performance, which includes climate change-related matters. Other senior employees are also assigned specific individual performance objectives related to ESG.

Reducing our greenhouse gas emissionsplus

Reducing the Group’s carbon footprint is a priority for Vitec. In 2021, we began calculating our entire Scope 3 emissions for the first time following the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard using 2020 data to set our baseline. Under the GHG protocol, there are 15 reporting categories, of which 11 apply to the Group. However, Category 9 Downstream Transportation and Distribution was omitted for 2020 because there is no feasible system to capture this data. In 2022, we will introduce measures to begin to capture this data. Further, given the magnitude of assessing the carbon emissions of our value chain, we have set yearly milestones to extend the reporting boundaries of complex categories. We will begin to calculate our 2021 Scope 3 data in Q2 of 2022 and intend to align our Scope 3 with our annual SECR reporting period. By widening our emissions data collection, we better understand our operations and value chain high emitting areas, which will help us develop our roadmap to achieve net zero in 2035 for Scope 1 and 2, and net zero in 2045 for Scope 3. Our Scope 1 and 2 emissions represent 3% of our total Group emissions, with our Scope 3 emissions representing the remaining 97%. Our detailed Scope 3 inventory can be found in our TCFD and ESG Reports.

Scope 1, 2 and 3 emissions

Emissions Scope 2019
tCO2e
(Scope 1 and 2 baseline)
2020
tCO2e
(Scope 3 baseline)
2021
tCO2e
Net Zero
target year
Scope 1 1,479 833* 1,357 2035
Scope 2 3,101 2,072* 2,524 2035
Scope 3 not fully captured 119,435 to be calculated Q2 2022 2045
Total Scope 1 and 2 4,580 2,905 3,881 2035
Total Scope 1, 2 and 3 - 119,435 - 2045

* Scope 1 and 2 emissions impacted by COVID-19.

 

Streamlined Energy and Carbon Reportingplus

This report summarises the energy usage, associated emissions, energy efficiency action and energy performance for the Group, under the government policy Streamlined Energy and Carbon Reporting (“SECR”), as implemented by the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.

Total Consumption (kWh) figures for energy supplies reportable by the Group are as follows:

Utility and Scope

UK (kWh)
(2020)
UK (kWh)
(2021)
Global (excluding UK) (kWh)
(2020)
Global (excluding UK) (kWh)
(2021)
Total kWh
(2020)
Total kWh
(2021)

Scope 1 – gaseous & other fuels

- 945,124 - 4,639,214 - 5,584,338
Scope 1 – transport (company fleet) - 243,081 - 1,104,929 - 1,348,010
Scope 2 – electricity - 1,716,613 - 8,784,640 - 10,501,253
Scope 2 – purchased heat, steam & cooling - 9,148 - - - 9,148
Scope 3 – grey fleet - 51,642 - 53,895 - 105,537
Total energy use – all Scopes 2,900,826 2,965,608 10,860,347 14,582,678 13,761,173 17,548,286

The total emission (tCO2e) figures for energy supplies reportable by The Vitec Group plc are as follows:

Location-based

Utility and Scope

UK (kWh)
(2020)
UK (kWh)
(2021)
Global (excluding UK) (kWh)
(2020)
Global (excluding UK) (kWh)
(2021)
Total kWh
(2020)
Total kWh
(2021)

Scope 1 total

          1,357.08

Scope 1 – gaseous & other fuels

- 173.14 - 4,639,214 - 5,584,338
Scope 1 – transport (company fleet) - 56.77 - 1,104,929 - 1,348,010
Scope 1 – refrigerants - - - 14.23 - 14.23
Scope 2 total           2,524.15
Scope 2 – electricity - 364.49 - 2,158.10 - 2,522.59
Scope 2 – purchased heat, steam & cooling - 1.56 - - - 1.56
Scope 3 total           23.67
Scope 3 – grey fleet   11.92 - 11.74   23.67
Total energy use – all Scopes 630 607.88 2,905 3,297.01 3,535 3,904.89

An intensity metric of kWh/tCO2e per £m turnover has been applied for the annual total consumption.

Intensity Metric UK
Intensity Metric
(2020)
UK
Intensity Metric
(2021)
Global
(excluding UK)
Intensity Metric
(2020)
Global
(excluding UK) Intensity Metric
(2021)
Total Global Intensity Metric
(2020)
Total Global Intensity Metric
(2021)
kWh / tCO2e / £m T/O - 1.54 - 8.32 10 9.86

Energy efficiency improvementsplus

The Group is committed to year-on-year improvements in our operational energy efficiency. A register of energy efficiency measures has been compiled and will be implemented within five years.

Measures undertaken in 2020:

  • The pandemic reduced Group carbon emissions in 2020 – it was anticipated that as the pandemic subsides and regular work practices resume, carbon emissions will increase in 2021.
  • Many buildings within the Group have timer and motion sensors for lighting to save on electricity usage.
  • The majority of the Group’s sites were working towards installing LED lighting throughout.
  • In Feltre, Italy, 220-240W neon lights were replaced with LED bulbs resulting in a 58,000kWh reduction and a cost saving of £11,000 per annum.
  • The Feltre facility installed new air compressors with an energy saving inverter system. Other buildings have programmable thermostats that are centrally managed to optimise heating and cooling needs.
  • Electricity at Bury St Edmunds, UK, and Cartago, Costa Rica, facilities are supplied from renewable energy sources.
  • The electricity contracts with Green Certificates at our two main sites in Italy were renewed in 2017 until 2021.
  • Sites in Italy, Bury St Edmunds and Costa Rica maintained their ISO 14001 compliance which were renewed in 2020.

Measures ongoing and undertaken through 2021:

  • Solar PV installation to the roof of the Cartago site in Costa Rica, has been implemented and commissioned in Q1 2022.
  • The installation of 11, high-efficiency air compressors at the Feltre site, Italy, resulted in a 20% energy reduction and cost-saving of €15,000 per annum.
  • Power supply contracts at the Feltre, Ashby and Byfleet sites have been moved to REGO backed supplies guaranteeing energy from renewable sources.
  • The Byfleet site has installed insulation in the roof void to reduce the gas usage requirements associated with space heating.
  • Across the Imaging Solutions Division, the reduction of business travel by 25% since 2019 has resulted in a €500,000 per annum saving.

Measures prioritised for implementation in 2022:

  • Solar PV installation to the roof at the Bury St Edmunds site has commenced and is due for commissioning in Q1 2022.
  • Other Vitec sites will be assessed for the feasibility of insulating Solar PV.
  • The transition to LED lighting in the Feltre, and Ashby-de-la-Zouch sites by 2023 will result in an estimated 80% energy reduction and cost savings of €70,000 per annum.
  • Car fleets across the organisation are converting to full hybrid or electric with 40% of vehicles now converted and 100% planned by 2024.

Reducing the Group’s carbon footprint is a priority for Vitec. In 2021, we began calculating our entire Scope 3 emissions for the first time following the GHG Protocol using 2020 data to set our baseline. Under the GHG protocol, there are 15 reporting categories, of which 11 apply to the Group. Given the magnitude of assessing the carbon emissions of our value chain, we have set annual milestones to extend the reporting boundaries of complex categories. For this first year of implementation, we here excluded downstream transportation (Category 9). We will begin to calculate our 2021 Scope 3 data in Q2 of 2022 and intend to align our Scope 3 with our annual SECR reporting period. By widening our emissions data collection, we better understand our operations’ high emitting areas, which will help us develop our roadmap to achieve net zero in 2035 for Scope 1 and 2, and net zero in 2045 for Scope 3.

Our Scope 1 and 2 emissions represent 3% of our total Group emissions, with our Scope 3 emissions representing the remaining 97%.

Scope 1, 2 and 3 Emissions

Emissions Scope Gross emissions (tCO2e) Percentage of total emissions
Scope 1 1,357 1%
Scope 2 2524 2%
Scope 3 (2020) 119,435 97%
Total 123,316 100%

Details of our full carbon balance sheet can be found in our TCFD and ESG Reports which will be published on our website in April 2022.

SECR methodology

Greenhouse gas emissions have been calculated according to the 2019 UK Government environmental reporting guidance. Consistent with the guidance, the following emissions factors – using the kWh gross calorific value (CV) where applicable, and CO2 equivalent conversion factors – were applied:

  • To convert natural gas consumption in the UK, US, and Australia, to tCO2e (Scope 1 emissions) the UK Department for Business, Energy & Industrial Strategy’s (“BEIS”) ‘Greenhouse gas reporting: conversion factors 2021’ database was used.
  • Emissions associated with the use of purchased electricity (Scope 2 emissions) were calculated using country-specific electricity emissions factors as per the sources in the table below:
Country Source used
Australia Australia National GHG Accounts 2021
China IGES 2021
Costa Rica IRENA 2019
France European Environmental Agency 2021
Germany European Environmental Agency 2021
Hong Kong Hong Kong Electric
India IGES 2021
Israel Default to BEIS 2021
Italy European Environmental Agency 2021
Japan Bureau of Environment - Tokyo Met Government
New Zealand Default to BEIS 2021
Singapore IGES 2021
UK BEIS 2021
Ukraine Default to BEIS 2021
USA EPA 2021
  • Transport related emissions from fuel combustion in Company cars (Scope 1 emissions) and grey fleet vehicles (Scope 3 emissions) in the UK, US, Australia and New Zealand were calculated using the BEIS ‘Greenhouse gas reporting: conversion factors 2021’ database.

Where billing data was missing for properties directly invoiced to the Group, usage was estimated at the meter level by pro-rating the kWh/day known consumption. The estimations equate to 1% of reported consumption. For properties where the Group is indirectly responsible for utilities (i.e. via a landlord or service charge), average kWh/m2 consumption for properties with similar operations was calculated at meter level and applied to the properties with no available data.

Reported total turnover (£m) was used to calculate a tCO2e/£m emissions intensity. This intensity was calculated for each emissions source respectively (natural gas, electricity, and transport fuels), as well as for the Company’s total emissions.

Total turnover (£m) 394.3