Focus Topics – Environmental matters

Climate action

Impacts, risks, and opportunities

Impacts

Our business contributes to global climate change, particularly through Scope 3 emissions generated during the use phase of our products, such as electric radiators, heating, and cooling systems. Our Scope 1 and Scope 2 emissions primarily stem from electricity and gas use in our production sites, particularly in energy-intensive processes like welding, drying, surface coating, and the generation of compressed air. Although these CO₂e emissions represent a smaller share compared to Scope 3, their reduction is central to our internal decarbonisation efforts.

Our ventilation systems also create a positive environmental impact by improving energy efficiency. Compared to traditional ventilation systems, our systems with integrated heat recovery reduce heating energy demand by capturing and reusing heat from outgoing to incoming air that would otherwise be lost, heating costs and minimising heat loss and in summer times the cool loss. The systems we sold in 2024 will use approximately 11.1 times less energy compared to traditional ventilation systems, avoiding 27.5 million GJ of energy use and 1,298,464 t CO₂e emissions over their lifetime, with an energy efficiency ratio of 1 to 7.3.¹

¹Emissions 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 182.9 g CO₂e/kWh (source: DEFRA 2024 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 7.3. Assuming exclusively heat pump heating and considerable global grid decarbonisation (20 g CO₂e/kWh) reduces the ratio to 1 to 3.7.
The original 2023 figures were incorrectly calculated due to an error in the calculation formula, and were originally reported as 1,921,578 t CO₂e of avoided emissions, with a ratio of actual emissions to alternative system emissions with no HRV of 1 to 6.2. The corrected figure for 2023 is 1,703,587 t CO₂e, with a ratio of 1 to 5.6. The difference from the corrected 2023 figure (1,703,587 t CO₂e) to 2024 figures can be ascribed to changes in the countries where products were sold, affecting national grid emissions, as well as a general decline in HRV unit sales.

Risks and opportunities

The TCFD assessment of climate-related risks and opportunities identified that climate change presents physical risks to our operations that are expected to increase in both frequency and severity.

In the short-term (under 12 months), Zehnder faces risks from extreme weather events disrupting operations and supply chains and potentially causing facility damage. Rising energy and carbon costs due to tighter regulations pose immediate challenges. Opportunities include building trust through climate risk disclosure, leveraging incentives for sustainable projects, and adapting early to shifting market demands for sustainable products.

In the medium term (one to three years), with a continuing increase in carbon taxes, shifting to renewable energy sources and increasing energy efficiency, while beneficial in the long run, will require substantial investments in technologies and new product development, potentially impacting short-term profitability. Adding to this challenge, the upcoming F-gas regulation mandates a shift to natural refrigerants within two years to meet legal environmental standards. To comply with this requirement, we are phasing out synthetic cooling agents in our climate products and adopting natural alternatives, particularly R290 (propane). Despite these hurdles, our expertise in energy-efficient systems positions us to capitalise on growing demand from climate-conscious consumers.

Long-term risks (more than three years) include locked-in emissions from existing assets, which could slow down progress toward our CO₂e reduction targets, especially if carbon costs rise. Retrofitting older facilities to reduce CO₂e emissions may be necessary. Chronic climate risks, like increased heat and aridity, could also affect sites in high-risk areas, such as China and Canada.

As global temperatures rise, demand for solutions that mitigate overheating will likely grow, bolstering our market presence. Our proactive approach helps us anticipate potential impacts while capitalising on emerging opportunities for sustainable growth.

Management approach

Governance

Zehnder Group integrates climate-related governance into its sustainability structure, employing tailored processes to address climate risks and opportunities effectively. The Sustainability Steering Committee, tasked with advancing the climate strategy, updates the Board of Directors on progress and challenges regarding CO₂e emissions reduction, energy efficiency, and decarbonisation initiatives. As the Chairman of the Board of Directors is also a member of the Sustainability Steering Committee, a direct connection between the committee’s activities and the Board’s oversight is ensured. The Audit Committee reviews the effectiveness of climate risk management measures annually, ensuring their integration into the broader risk management framework.

The Board of Directors actively integrates climate-related considerations into strategic planning. Therefore, our climate targets are validated by the SBTi. Climate factors are incorporated into major action plans, risk policies, budgets, and business plans, aligning with long-term business objectives and guiding decisions on capital investments, acquisitions, and divestments. Furthermore, climate-related risks play a key role in setting performance objectives and monitoring overall progress.

Within our organisational structure, responsibilities are clearly defined. The Group Executive Committee, supported by the Sustainability Steering Committee, oversees the implementation of our climate strategy, ensuring we meet the SBTi targets. The Group Sustainability Manager coordinates the climate strategy, collects data, and ensures compliance with international standards. The Competence Centres handle the operational execution, tracking KPIs such as CO₂e emissions and energy consumption, which are reported to the Steering Committee. This structured approach ensures consistency in executing the climate strategy across all levels, with comprehensive reporting up to the Board of Directors.

Strategy

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

Our decarbonisation strategy, based on a comprehensive analysis of CO₂e emission sources, is supported by a detailed roadmap outlining key actions. These include enhancing energy efficiency, transitioning to renewable energy, and advancing circular product innovation. Initial priorities focus on high-impact initiatives such as installing photovoltaic parks, transitioning from fuel-powered to electric vehicles, and adopting certified green electricity mostly in line with RE100 standards.

We will pursue more advanced technical projects, such as upgrading technologies in specific radiator production processes to achieve further emission reductions. At the same time, 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. Approved by the Board of Directors, this strategy is fully aligned with our business objectives.

Our strategy is based on a scenario analysis to evaluate the effects of low-emission (+1.5°C) and high-emission (+4°C) pathways, assessing physical and transition risks on operations, finances, and supply chains. Investments in renewable energy and energy-efficient technologies aim to mitigate exposure to energy cost volatility and carbon taxes. Simultaneously, developing products that align with a low-carbon economy enables us to seize opportunities in shifting markets and regulations. The results of these scenario analyses are integrated into our financial planning, allowing us to proactively adjust our strategy and remain resilient.

We use various metrics to assess climate-related risks and opportunities, such as CO₂e emissions, energy consumption, and the share of renewable energy in our operations. We also evaluate the potential financial impact of carbon pricing on our business. Climate-related performance metrics are linked to our remuneration policies, with 30% of the long-term bonus for the Group Executive Committee tied to sustainability targets, including climate goals. We are exploring the extension of similar incentives to other staff, reinforcing a commitment to sustainability across the organisation.

Risk management

Climate-related risks are fully embedded in our Enterprise Risk Management framework, enabling a systematic approach to their identification, assessment, and management. Zehnder actively monitors global climate regulations to maintain compliance and adapt to emerging requirements.

Risk materiality is evaluated based on potential cash flow impacts. Mitigation strategies include investing in energy-efficient technologies, retrofitting facilities, and adjusting supply chain practices to boost resilience. Management regularly assesses whether to mitigate, transfer, accept, or control risks, ensuring alignment with strategic objectives.

This integrated approach ensures climate-related risks are managed alongside other business risks, enabling informed decision-making, proactive risk management, and the ability to capitalise on emerging opportunities.

Implementation and outlook

To implement the above management approach and policies, we defined two ambitions, each supported by one or more targets and monitored via specific 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: In the meantime, we have successfully submitted our science-based targets for validation to the SBTi. Our goal is a 55% reduction in Scope 1 and 2 emissions, and a 33% reduction in Scope 3 emissions by 2033, from a 2023 baseline. These targets align with the SBTi pathway to limit global warming to 1.5°C for Scope 1 and 2, and well below 2°C for Scope 3.
• Outlook: By 2050, we aim to achieve net-zero emissions by reducing CO₂e emissions by at least 90% across all scopes and neutralising any remaining CO₂e emissions through carbon removals. Following the submission to SBTi, in 2025 we will continue implementing our decarbonisation roadmap, focusing on further energy reductions and expanding the use of renewables.

Target: Reduce Scope 1 and 2 emissions

• Status: In 2024, our Scope 1 emissions amounted to 8,377 t CO₂e, reflecting a 9.2% decrease from the restated 2023 figure (details in the GRI 305-1 table footnote). Scope 2 emissions (market-based) totalled 7,670 t CO₂e, representing a 9.3% decrease from the restated previous year (details in the GRI 305-2 table footnote). Together, Scope 1 and 2 emissions made up approximately 1.0% of our total emissions. These reductions stem from lower production volumes at some production sites but also from efforts to minimise fossil fuel use for heating and to optimise electricity consumption.
• Outlook: We aim to increase the share of renewable electricity in our operations. Currently, 48.2% (45.5% in 2023) of our electricity consumption is certified as 100% renewable. The primary driver of our Scope 1 and 2 emissions reductions will be the purchase of green electricity through energy attribute certificates (EACs), a focus area with significant potential in the coming years. Through group-wide coordination for the largest business units we aim to purchase EACs that meet the technical criteria of RE100, the global corporate renewable energy initiative. Complementing this, ongoing photovoltaic installations at multiple sites are expected to enhance our energy independence and reduce CO₂e emissions. We are starting to replace phased-out fuel-powered vehicles with electric vehicles for our European operations, focusing on regions where this shift is both practical and impactful.

Target: Reduce Scope 3 emissions:

• Status: For Scope 3, all relevant categories as defined by the GHG Protocol were included (details in the GRI 305-3 table footnote). In 2024, Scope 3 emissions amounted to 1,602,591 t CO₂e, 14.5% less than in the previous year, constituting 99.0% of Zehnder’s total carbon footprint. A miscalculation in the 2023 report resulted in more emissions being reported than should have been for the use phase of sold products. This has led to a significant change in Scope 3 emissions and has triggered a restatement of the 2023 figures for all Scopes. Details about the restatements can be found in the footnotes of the GRI tables below.  
  
  The use phase of electrical products sold over their lifetimes remains the primary source of Scope 3 emissions, accounting for 74.1% of Scope 3 emissions and showing a 15.0% decrease compared to 2023. Purchased goods are the second-largest contributor at 22.8% of Scope 3 emissions. Electronics make up 62.1% of purchased goods emissions, followed by metals (25.3%) and non-packaging plastics (8.9%), together making up 96.3% of this category’s emissions. Combined, there was a 14.7% decrease in emissions from purchased goods compared to the previous year.
• Outlook: We aim to develop products with a 20% lower environmental impact for new launches after 2025. One of our key levers is improving the energy efficiency of our electrical products, given the use phase is by far the biggest contributor to our total CO₂e emissions. Other efforts include increasing recycled content or alternative materials and collaborating with suppliers to implement emissions reduction strategies, as their Scope 1 and 2 emissions affect our Scope 3 purchased goods emissions.

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 risk management process and internal control system

• Status: In 2024, we aligned with TCFD recommendations by embedding climate-related risks into our risk management and control systems. An in-depth analysis of climate risks and opportunities was conducted, with the evaluation based on likelihood and potential impact. The findings from the physical risk assessment were integrated into our risk management process, using a risk ratio to score site vulnerability to various hazards. Additionally, transition risks identified through the TCFD analysis were incorporated into the Group-level risk management framework. As a result, climate risks are now systematically embedded in our routine assessments and internal control processes, ensuring they are consistently addressed in strategic planning.
• Outlook: We will enhance our internal controls to ensure that climate-related risks are first of all consistently monitored, and we will continue to update our risk management practices to address emerging climate challenges on an ongoing basis.

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