Focus Topics – Environmental matters

Climate action

Impacts, risks, and opportunities

Impacts

Our business contributes to global climate change through emissions in Scopes 1 to 3. While Scope 1 and Scope 2 emissions arise primarily from electricity and gas consumption in our production facilities, particularly in energy-intensive processes like welding, drying, surface coating, and the generation of compressed air, Scope 3 emissions arise during the use phase of our products, such as electric radiators or heating and cooling systems. Although Scope 3 emissions account for the largest share, reducing emissions in all three scopes is central to our internal decarbonisation efforts.

Nevertheless, Zehnder’s ventilation systems also contribute to increased energy efficiency through integrated heat recovery, which uses outgoing air to heat or cool fresh outdoor air entering the ventilation system to within a few degrees of the room temperature. As these are avoided emissions, they are not included in our GHG emissions calculations; however, this technology can considerably reduce heating and cooling costs, leading to a more efficient use of energy resources. With an emission efficiency ratio of 1 to 7.5 compared to an alternate system¹, 10.2 times less energy is required. This corresponds to a reduction in energy consumption of 31.3 million GJ and savings of 1,498,487 t CO₂e emissions over its entire lifetime – a significant benefit to the environment while also benefitting our customers.

¹ Emissions and energy consumption are calculated for the full product use phase, and do not include emissions at other phases such as production, transport or disposal. Estimated product lifetimes vary between 8 and 20 years, depending on the product line. Grid emissions are split by country (source: International Energy Agency (IEA)). They are assumed to remain constant during product lifetime. Lost heat is replaced by heating systems, split between heat pumps (energy efficiency ratio of 3 as a conservative choice for renewables) and natural gas heaters (85% conversion efficiency). Natural gas heaters were selected as the conservative choice for non-electrical heating. Natural gas is assumed to have an emission factor of 183.0 g CO₂e/kWh (source: Department for Environment, Food and Rural Affairs (DEFRA) 2025 v1.0). The ratio of natural gas heaters to heat pumps is country-dependent and is generated using values provided by the Institute of Building Technologies and Energy at Lucerne School of Engineering and Architecture (HSLU), Switzerland, based on current national ratios of fossil-to-fossil-free heating methods. Data sources for heating per country: USA: US Energy Information Administration, Canada: Canada Energy Regulator, China: US Energy Information Administration, EU: Eurostat, UK: Statista, Switzerland: Energie Schweiz, Other: Assumption 80-20 split between fossil and fossil-free. The ratio of CO₂e consumption to an alternative system is calculated as 1 to 7.5. Assuming exclusively heat pump heating and considerable global grid decarbonisation (20 g CO₂e/kWh) reduces the ratio to 1 to 3.5.

Risks and opportunities

The TCFD assessment on climate-related risks and opportunities revealed that not only do Zehnder’s business activities impact climate change, but climate change itself also influences Zehnder’s business activities. It is expected that the frequency and severity of physical risks will increase in the short, medium, and long term.

In the short term (within 12 months), Zehnder Group faces risks from extreme weather events that may disrupt operations and supply chains or damage assets. Stricter regulations increase costs, particularly for energy and CO₂, but also create opportunities through greater transparency on climate risks. Incentives for sustainable projects further support early adaptation to changing market requirements and rising demand for sustainable products.

In the medium term (one to three years), Zehnder Group’s investment in new technologies and development of innovative products for the transition to renewable and more energy-efficient energy sources and natural refrigerants will have a temporary impact on profitability, but will be beneficial in the long term. This is especially relevant against the backdrop of continuously rising CO₂ taxes and growing demand from climate-conscious consumers.

Long-term risks (more than three years) include the potential need to retrofit older facilities, as the emissions captured there could slow progress towards achieving our CO₂e reduction targets, particularly if carbon costs continue to rise. Furthermore, chronic climate risks, such as increasing heat and drought, could also affect sites in high-risk areas, for example in China and Canada.

At the same time, rising global temperatures may result in increased demand for solutions to mitigate overheating, which could consolidate our market position. Our proactive approach allows us to anticipate potential impacts early while capitalising on new opportunities for sustainable growth.

Management approach

Governance

Zehnder Group embeds climate governance within its sustainability framework, using tailored processes to manage climate risks and opportunities. The Sustainability Steering Committee oversees the climate strategy and reports progress and challenges on CO₂e reduction, energy efficiency, and decarbonisation initiatives to the Board of Directors. Because the Chair of the Board also sits on the Committee, Board oversight is directly connected to its work. The Audit Committee conducts an annual review of climate risk management to confirm its integration into the wider risk management framework.

The Board incorporates climate considerations into strategic planning: our targets are validated by the SBTi and climate factors are built into major action plans, risk policies, budgets, and business plans. These considerations guide capital investment, acquisition, and divestment decisions and shape performance objectives and progress tracking across the Group.

Roles are clearly defined. The Group Executive Committee, supported by the Sustainability Steering Committee, oversees delivery of the climate strategy and achievement of SBTi targets. The Group Sustainability Manager coordinates the strategy, manages data collection, and ensures alignment with international standards. Competence Centres execute operational measures, track KPIs (including CO₂e emissions and energy use), and report results to the Steering Committee. Reporting across all levels ensures consistent execution and full visibility to the Board.

Strategy

We are committed to growth without environmental harm. In line with the SBTi, we have reduction targets for Scope 1, 2, and 3 emissions and aim to reach net-zero CO₂e by 2050, with interim targets for 2033.

Our decarbonisation strategy is informed by a full analysis of CO₂e sources and backed by a roadmap. Core actions include improving energy efficiency, switching to renewable energy, and advancing circular product innovation. Early high-impact priorities include installing photovoltaic parks, converting fuelled fleets to electric vehicles, and procuring certified green electricity largely consistent with RE100 standards.

We are progressing towards more advanced technical measures, including technology upgrades in selected radiator production processes to drive further cuts. In parallel, we are investing in equipment upgrades, optimising energy management systems, and developing low-carbon heating and cooling solutions such as heat pumps and ventilation systems with integrated heat recovery. The Board of Directors has approved this strategy, which is fully aligned with our business objectives.

Scenario analysis of low-emission (+1.5°C) and high-emission (+4°C) pathways assesses physical and transition risks across operations, finances, and supply chains. Investments in renewables and energy-efficient technologies help mitigate exposure to energy price volatility and carbon taxation, while low-carbon product development positions us to capture opportunities created by shifting markets and regulation. The results feed into our financial planning so we can adjust proactively and remain resilient.

We track climate-related risks and opportunities using metrics such as CO₂e emissions, energy use, and the share of renewable energy in operations, and we assess potential financial impacts from carbon pricing. Changes in these emissions and energy-related KPIs reflect not only management measures but also external drivers such as production volumes, business activity, and product mix; trends should therefore be interpreted in that context. Climate performance influences remuneration: 30% of the Group Executive Committee’s long-term bonus is linked to sustainability targets, including climate goals. We are exploring extending similar incentives to other employees to embed sustainability across the organisation.

Our climate strategy places strong emphasis on improving the energy efficiency of our products, as the use phase of electrical systems is the largest contributor to our Scope 3 emissions. We design radiators, ventilation, and climate systems to minimise energy demand in operation, for example through integrated heat recovery, optimised airflow, and intelligent control. Digital solutions such as our Clean Air Remote Application (CARA) help customers operate equipment efficiently by continuously adjusting performance based on sensor data. Product development teams increasingly use energy performance as a key design criterion, ensuring new launches contribute measurably to reducing emissions over their lifetime.

Risk management

Climate-related risks are fully embedded within our Enterprise Risk Management (ERM) framework, enabling systematic identification, assessment, and management. Zehnder Group proactively tracks global climate regulation to remain compliant and adapt to emerging requirements.

Risk materiality is assessed through potential cash-flow impacts. Mitigation responses include investing in energy-efficient technologies, retrofitting facilities, and adapting supply-chain practices to strengthen resilience. Management regularly evaluates whether to mitigate, transfer, accept, or control each risk to keep actions aligned with strategic objectives.

Integrating climate with broader business risks supports well-informed decisions, proactive risk management, and the ability to capture emerging opportunities.

Implementation and outlook

Implementation of the above management approach is structured around two focus areas, each with defined targets and KPIs.

Targets

Ambition: Reduce greenhouse gas emissions and achieve net-zero emissions by 2050 for Scope 1, 2, and 3

Target: Submit science-based targets for validation by the SBTi

• Status: Our science-based targets have been validated in 2025 by the SBTi and published on their website. Our goal is to reduce Scope 1 and 2 emissions by 55% and Scope 3 emissions by 33% by 2033 from a 2023 baseline. These targets align with the SBTi’s 1.5°C pathway for Scopes 1 and 2 and its below-2°C pathway for Scope 3.
• Outlook: By 2050, we aim to achieve net-zero emissions by reducing CO₂e emissions by 90% and neutralising the rest through carbon removals. We will continue implementing our roadmap, focusing on energy reductions and using more renewables. For hard-to-abate emissions, we will use verified nature-based removals, such as reforestation and soil carbon sequestration, as well as engineered removals, such as direct air capture with storage, including credible removal credits.

Target: Reduce Scope 1 and 2 emissions

• Status: In 2025, we reduced our Scope 1 emissions to 7848 t CO₂e, achieving a 6.3% decrease from 2024, primarily due to lower natural gas use following the outsourcing of radiator production in China and the relocation of production from Switzerland to France. Scope 2 emissions (market-based) declined to 6940 t CO₂e, a 9.5% decrease from the previous year. This decline was primarily driven by the use of RE100-aligned Energy Attribute Certificates (EACs) in Poland, which covered 21% of the site’s 2025 grid electricity. Together, Scope 1 and Scope 2 emissions accounted for 1.1% of our total emissions and are 16.4% below the 2023 base year, keeping us aligned with our SBTi reduction pathway and on track to meet our Scope 1 and 2 targets.
  
  Renewable energy is one of our main levers for decarbonisation. In 2025, 45.6% of our electricity consumption was certified as 100% renewable (48.2% in 2024), either through direct supply or via EACs. The decline compared to the previous year reflects a change in consumption patterns: production facilities already supplied with 100% renewable energy consumed less electricity, while sites without renewable energy contracts experienced increased demand. Additionally, a change of supplier occurred at one location in the Netherlands, further reducing the certified share when the switch was made from green electricity to a conventional energy supply.
  
  While most of our sites purchase electricity locally, our three largest sites in Germany, Türkiye, and Poland are centrally managed and represent key levers for expanding the use of renewable energy across the company. Electric vehicles are already in operation in multiple sites, including Germany and Türkiye, and a new photovoltaic system is being installed at our headquarters to enhance energy independence.
• Outlook: From next year, we will extend the use of electric vehicles in selected European countries. While not all certificates are fully aligned with RE100 yet, all EACs for our sites in Lahr (Germany), Manisa (Türkiye) and Bolesławiec (Poland) are expected to meet these criteria from 2026. Alongside this, expanding on-site renewable generation and electrifying operations will further advance our progress towards a low-carbon, energy-independent future.

Target: Reduce Scope 3 emissions

• Status: Scope 3 remains our largest source of emissions, amounting to 1,348,431 t CO₂e in 2025, or 98.9% of our total footprint². This is a 5.0% reduction from the previous year and is primarily driven by lower radiator sales and lower sales at a Chinese ventilation branch. These reductions are 19.5% below the 2023 base year and in line with our SBTi reduction pathway, keeping us on track to meet our Scope 3 targets. The use phase of electrical products sold over their lifetime continues to be the biggest contributor, accounting for 81.2% of Scope 3 emissions, representing a 7.8% decrease from 2024³. Purchased goods are the second-largest contributor at 15.0% and increased 13.9% from 2024, with emissions stemming mainly from metals (44.4%), non-packaging plastics (25.8%), and electronics (21.8%)⁴.
  
  In response to these drivers we focus on materials, supplier collaboration, and product use. Low-emission electric arc furnace steel is being trialled at our two radiator sites in Germany and France, with positive results. The share is around 10% of demand in 2025 and could rise to up to 25% in 2026, pending the outcome of final tests. Recycled-content certificates are not yet available, and supply is currently single-sourced, so diversification remains a priority. New SAP material groups are being established in our ERP system to track recycled content in plastics, while development work continues to increase recycled shares and improve product recyclability.
  
  Our radiators and ventilation systems are designed for energy-efficient operation. Actual performance depends on correct installation and use. We support users with practical guidance and controls to help them optimise settings and reduce avoidable energy use. Our CARA continuously adjusts system performance based on sensor input to maximise efficiency.
• Outlook: We will continue to expand the use of recycled and low-emission materials, working closely with suppliers to scale up feasible solutions. Further digitalisation and smart control systems will help customers operate our products even more efficiently, contributing to lower emissions throughout the product life cycle.

Ambition: Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters

Target: Analyse the recommendations of the TCFD and further embed climate risks into the risk management process and internal control system

• Status: Climate-related risks identified through the TCFD-based physical risk assessment have been integrated into the company’s risk management framework. Business units with “Medium” to “High” risk levels include these in their local risk processes, evaluating mitigation measures and planned actions. Transition risks identified in the 2024 TCFD analysis are reviewed annually by the Group Executive Committee and presented to the Board for approval each December.
• Outlook: Our goal at this point in time remains to raise awareness of climate risks and continue to educate the local Business Units, as well as the Management and Board. These risks will be monitored at both Business Unit and Group Executive Committee levels to ensure they are identified as early as possible, allowing appropriate measures to be taken where necessary.

² The 2023 (base year) and 2024 (previous year) figures have been restated due to cumulative errors of >5% to the original figures triggering a full restatement, incorporating corrections and methodology changes. Total Scope 3 figures were affected by this restatement. The original reported figures were 1,602,591 t CO₂e emissions for 2024 and 1,874,862 t CO₂e emissions for 2023. For further information, see Restatements of information.

³ Use of sold products (Scope 3.11) figures were not affected by the restatement.

⁴ Purchased goods (Scope 3.1) figures were affected by the restatement. The original reported figures were 364,863 t CO₂e emissions for 2024 and 427,673 t CO₂e emissions for 2023. For further information, see Restatements of information.

Metrics

GRI 302: Energy 2016
Disclosure 302-1 Energy consumption within the organisation

GRI 302: Energy 2016
Disclosure 302-2 Energy consumption outside of the organisation

GRI 302: Energy 2016
Disclosure 302-3 Energy intensity

Energy circularity
Renewable energy

GRI 305: Emissions 2016
Disclosure 305-1 Direct (Scope 1) GHG emissions

GRI 305: Emissions 2016
Disclosure 305-2 Energy indirect (Scope 2) GHG emissions

GRI 305: Emissions 2016
Disclosure 305-3 Other indirect (Scope 3) GHG emissions

GRI 305: Emissions 2016
Disclosure 305-4 GHG emissions intensity