Impact, risk and opportunity management

E1-2 – Policies related to climate change mitigation and adaptation

The policies covered by this disclosure requirement relate to material issues in connection with climate change, both in terms of the reduction of greenhouse gas emissions and the adaptation to climate-related changes.

Transition plan for climate change mitigation

The transition plan for climate change mitigation at thyssenkrupp is aimed at achieving net zero emissions by 2050 as the result of decarbonizing production, products and energy. Among the main levers are the establishment of hydrogen-capable steel production, the development of a product portfolio for CO₂-reduced value creation, the improvement in energy efficiency and the increased use of renewable energy, also as a result of the company’s own generation activities. Climate-related transition risks such as carbon pricing and market changes are addressed. Physical adaptation to the impacts of climate change is not a primary focus.

The target of attaining net zero emissions groupwide by 2050 at the latest is based on science-based medium- and long-term targets in the system that was assessed by SBTi in fiscal year 2024 / 2025 as being compatible with the 1.5-degree Celsius target of the Paris Climate Agreement.

One main lever for achieving this target is the decarbonization of steel production, especially by constructing and operating a fully hydrogen-capable DR plant. During the transition phase, the plant can be operated with natural gas before a switch is made to renewable electricity and hydrogen. The transition plan is supplemented by groupwide measures to improve energy and process efficiency and increase the use of renewable energy, both from external sources and, to a growing extent, generated by the company itself. Moreover, its is planned to use neutralization technologies to capture and store or use unavoidable GHG emissions.

The transition plan also addresses indirect GHG emissions across the value chain – in the upstream value chain through the use of CO₂-reduced raw materials and starting products, the extraction and manufacture of which are usually associated with lower emissions from combustion, and in the downstream value chain as a result of developing and marketing products with a lower carbon content than conventional products and technologies that are themselves low-emission or facilitate lower emissions. With these products and technologies, thyssenkrupp is seeking to help its customers mitigate their GHG emissions and achieve their climate targets. In this way, the transition plan also accesses the market potential harbored by the industrial transition to a more sustainable economic system.

It likewise addresses key transition risks, such as energy price-related cost increases resulting from carbon pricing, stricter emissions requirements and stakeholders’ increasing sustainability expectations due to the decarbonization of energy supply, production and the product portfolio.

Key management mechanisms in the transition plan include defined metrics, continuous monitoring by way of the annual greenhouse gas balance sheets and the regular assessment of progress in the context of sustainability reporting.

Insurance-related risk management

Insurance-related risk management addresses the climate-related need for adaptation by hedging against physical risks such as storms, heat and flooding. The goal here is to prevent or mitigate potential impacts. Transition risks such as supply-side bottlenecks due to a transformation-related increase in demand for certain materials and products are addressed in the context of business continuity management, which is part of this policy.

Through insurance-related risk management, the group seeks to hedge certain corporate risks. Physical climate risks are a central aspect of this approach, with the goal of specifically strengthening resilience to the physical impacts of climate change.

One focus is on physical climate risks such as storms, flooding and heat waves that may cause damage to production installations and infrastructure or disrupt supply chains. In order to limit the financial consequences of property damage and business interruptions, thyssenkrupp relies on risk-based insurance solutions. In this connection, risks are systematically identified and assessed as the basis for developing suitable hedging measures.

In respect of certain climate-related transition risks, for example, caused by supply-side bottlenecks due to a transition-related increase in demand for selected materials and products, thyssenkrupp relies on systematic business continuity management as a way of strengthening its operational resilience. Key measures are the early identification of critical dependencies and the development of contingency and recovery plans.

Regular risk analyses and the review of existing insurance concepts in respect of loss scenarios, probabilities of occurrence and prevention potential serve to systematically identify, assess and monitor climate-related loss risks.

E1-3 – Actions and resources in relation to climate change policies

Implementing the transition plan for climate change mitigation serves as the central framework for achieving net zero emissions groupwide by 2050 at the latest. It covers specific actions for decarbonizing the energy supply, production and the product portfolio. The transition plan is flanked by policies to manage certain climate-related risks.

One focus for decarbonizing the group is the construction and operation of a fully hydrogen-capable DR plant. During the transition phase, the plant can initially be operated with natural gas before a switch is made to renewable hydrogen. In addition, thyssenkrupp is taking ongoing action with no fixed end date, including the gradual replacement of fossil energy sources, the use of renewable energy, efficiency improvements in energy and production processes and the development and marketing of products with a lower carbon content than conventional products and of technologies that are low-emission themselves or facilitate emission reductions – including materials, system solutions for the hydrogen economy and technologies to decarbonize energy-intensive production processes. Technologies to capture and store or use unavoidable GHG emissions can also be used. Further actions for the group’s long-term decarbonization after 2030 will be planned and firmed up in the future.

The aforementioned actions address emission-relevant activities in various production areas of the group and cover both Scope 1 and Scope 2 emissions in the group’s own operations, as well as relevant Scope 3 emissions. The construction and operation of the hydrogen-capable DR plant by Steel Europe is focused at one European site. However, other decarbonization levers are being implemented groupwide and globally.

Implementing the decarbonization levers of the transition plan requires CapEx and OpEx. The table below discloses the expenditure in the reporting year, together with an estimate of the likely future CapEx and OpEx.

In the reporting year, the use of renewable energy and the implementation of energy efficiency measures resulted in overall reductions of more than 150 kt CO₂e. Further reductions totaling around 2.8 million t CO_2.8e are expected by fiscal year 2029 / 2030. The main effect will result from switching various process steps in steel production. Additional CO₂ reductions are expected especially from an adjustment of steel production volumes. In the reporting year, operating expenditure (OpEx) for implementing the transition plan was around €8 million, and capital expenditure (CapEx) around €104 million. The bulk of the capital expenditure – just under € million – went to the ongoing construction of the hydrogen-capable DR plant in Duisburg. For the period from fiscal year 2025 / 2026 to fiscal year 2029 / 2030, cumulated expenditure of around €1billion is envisaged for further implementation of all decarbonization measures in the transition plan.

At present, this expenditure is being financed from the company’s own capital resources and public funding programs. In the future, sustainable financing instruments could be significant. For the company’s investment in the hydrogen-capable DR plant, a CapEx plan was prepared in accordance with the EU Taxonomy. This is described in the relevant section.

The feasibility of the decarbonization levers depends in part on external factors such as regulatory requirements, the availability of renewable hydrogen and access to funding. Therefore, if conditions change, it may be necessary to take an adaptive management approach.