Double Materiality Assessment

Belimo's 2024 double materiality assessment (DMA) identified 13 key sustainability topics through a comprehensive evaluation of financial risks and opportunities, and environmental and social impacts. The assessment aligns with the European Sustainability Reporting Standards (ESRS) and the Corporate Sustainability Reporting Directive (CSRD). The results of the DMA form the basis of Belimo's sustainability strategy, targets and metrics.

Background

In 2024, Belimo updated its materiality assessment methodology in line with the requirements of the European Union's CSRD and ESRS. The double materiality assessment (DMA) conducted for the first time helped to define the sustainability topics that are material for Belimo’s business and its stakeholders.

The DMA framework recognizes that materiality encompasses both financial (outside-in) risks and opportunities and environmental and social (inside-out) impacts. While financial materiality considers risks and opportunities that may affect the company financially, impact materiality focuses on how Belimo’s activities affect the environment and society. The assessment encompasses Belimo's operations and its entire value chain. Stakeholder engagement was integral to the process, ensuring a balanced approach.

Stakeholder Engagement

Internal and external stakeholders were involved in the process of quantifying and scoring the impacts, risks, and opportunities. The senior management (Extended Executive Committee) was interviewed and highlighted important topics for the longlist. Internal workshops and external interviews were conducted to quantify the potential material issues and to assess the impacts, risks and opportunities. The internal workshops were held across different functions, business lines, and hierarchy levels. Interviews with external stakeholders included customers, suppliers, the financial community, academia, and associations. The senior management approved the outcome of the DMA as the 13 key sustainability topics.

Methodology

The following methodology for assessing double materiality was applied:

1. Business model analysis, desk research and value chain analysis to derive a longlist of potentially material topics (approx. 450 topics)
2. Shortening longlist to shortlist of potentially material topics (22 topics);
3. Identification of impacts, risks, and opportunities (IROs);
4. Validation and evaluation of potentially relevant material topics from an inside-out perspective (impact materiality) and outside-in perspective (financial materiality) through stakeholder engagement activities, including external interviews and internal business impact workshops;
5. Threshold setting to define which topics should be considered as material (13 topics);
6. Validation and approval of material topics by senior management.

Financial Risks and Opportunities

Financial risks and opportunities were assessed based on likelihood and (potential) magnitude of financial risk or opportunity.

Impacts

Impacts may be actual or potential, negative or positive, short-, medium-, or long-term, intended or unintended, and reversible or irreversible. "Actual" versus "potential" impact relates to the distinction between the impacts that have already occurred (actual impacts) versus the impacts that could occur under certain conditions or future scenarios (potential impacts). Belimo assessed scale, scope, irremediability, and likelihood of impacts. Scope, scale and irremediability of actual and potential negative impacts define the severity of an impact. For positive impacts, irremediability and severity is inherently not applicable.

Threshold Setting

The materiality threshold for actual positive impacts was determined based on the combined scores for scale and scope. For potential positive impacts, the threshold was set according to the likelihood of occurrence, in addition to the combined scale and scope scores.

The materiality threshold for actual negative impacts was set on the severity score (sum of scale, scope, irremediability). For potential negative impacts, the threshold was set according to the likelihood of occurrence, in addition to the severity scoring.

The materiality threshold for financial risks and opportunities were set on the likelihood of occurrence and the magnitude of financial effects.

Outcome of the Double Materiality Assessment

List of Topics

As the result of the DMA, a total of 13 topics were found to be material for Belimo.

Stakeholder Perspective

Customers identified energy efficiency, climate change, and supply chain-related issues as Belimo's most relevant topics, while investors prioritized corporate governance and business ethics. Suppliers emphasized the need to focus on climate change and data privacy, academia highlighted digitalization, and associations and public organizations stressed the importance of energy efficiency and climate actions to reduce greenhouse gas emissions, thereby helping to meet global climate targets and improving air quality.

Double Materiality Assessment Matrix

The outcome of the DMA is illustrated in a matrix:

Contribution to Energy Efficiency, Digitalization and Innovation & Solution Leadership were assessed as the topics with the highest financial opportunity for Belimo while Data Privacy & Cybersecurity and Product Quality, Safety & Compliance were associated with the highest financial risk.

A high positive impact on society and/or the environment was linked to the topics of Contribution to Energy Efficiency and Innovation & Solution Leadership. High (potential) negative impacts were associated with the Environmental Footprint of Supply Chain & Traceability and Climate Change.

ESRS Topical Standards

The following ESRS topical standards are deemed to be applicable to Belimo:

Overview of Material Topics

Climate Change

• Impacts: Manufacturing processes that rely on fossil fuels, contribute directly to greenhouse gas (GHG) emissions and climate change. While Belimo's products are designed to enhance building energy efficiency, their actual environmental impact depends on factors such as product design (e.g., optimized energy consumption) and the type of energy used in the system (renewable or non-renewable). Additionally, the extraction, processing, and transportation of the materials (e.g., metals, plastics) required for Belimo's products can generate significant emissions.
• Risks: Belimo faces financial risks in transitioning to a circular economy if its products fail to meet evolving eco-design standards, potentially leading to increased costs (e.g., regulatory) associated with implementing eco-design principles and sourcing of recycled materials. Belimo also faces reputational risks if it is not transparent about GHG emissions and not actively addressing climate change. Failure to achieve ambitious climate targets could result in reputational damage and loss of investor and customer confidence.
• Opportunities: Belimo can capitalize on financial opportunities by leading in the development of energy-efficient and low-emission HVAC solutions. This can drive revenue growth as customers and markets increasingly prioritize sustainability. Furthermore, enhancing energy efficiency in its operations can generate cost savings, improving the company's overall financial performance.
• Value chain: Entire value chain
• Time horizon: Short-term, medium-term, long-term
• Link to ESRS: E1 Climate change (Energy, Climate change adaptation, Climate change mitigation)

Energy Management 

• Impacts: Belimo's energy consumption in its operations contributes to greenhouse gas emissions, which can exacerbate climate change and its associated impacts.     
• Risks: Belimo faces financial risks associated with rising energy costs, limited energy availability and potential regulatory changes that impose stricter energy efficiency requirements on its own operations.
• Opportunities: Belimo has the opportunity to reduce operating costs by optimizing its energy management practices.
• Value chain: Own operations
• Time horizon: Short-term, medium-term, long-term
• Link to ESRS: E1 Climate change (Energy)

Contribution to Energy Efficiency

• Impacts: Belimo’s innovative HVAC solutions significantly contribute to energy efficiency in buildings, reducing overall energy consumption and greenhouse gas emissions. These high-performing field devices enable more efficient building operation, contributing to substantial energy savings and global climate change mitigation effects.
• Risks: Belimo faces financial risks if its products do not keep pace with evolving energy efficiency standards or if competitors introduce more advanced energy-efficient solutions. This could result in decreased market share and revenue. Additionally, regulatory changes mandating higher energy efficiency may increase compliance costs and necessitate further investment in product development.
• Opportunities: By being at the forefront of energy-efficient HVAC solutions, Belimo can capitalize on growing market demand as industries and consumers prioritize energy savings and reduced emissions. Energy-efficient products not only appeal to customers, but also offer cost savings, strengthening Belimo's value proposition and driving sales growth.
• Value chain: Downstream value chain
• Time horizon: Short-term, medium-term, long-term
• Link to ESRS: E1 Climate change (Energy, Climate change adaptation)

 Environmental Footprint of Supply Chain & Traceability

• Impacts: Belimo’s supply chain activities contribute to environmental degradation through energy consumption and waste generation. Inadequate traceability can lead to inefficient logistics and transportation, resulting in higher carbon emissions from unnecessary movements and a lack of optimization in shipping routes.
• Risks: Belimo faces financial risks associated with the environmental footprint of its supply chain, due to emissions from suppliers and potential cost increase if suppliers fail to meet sustainability standards. Furthermore, regulatory and customer pressure for greater transparency and accountability in supply chains can increase compliance costs and pose reputational risks if suppliers fail to adhere to environmental standards.
• Opportunities: Belimo has the opportunity to enhance its financial performance by optimizing its supply chain for sustainability. Collaborating with suppliers to minimize their environmental footprint can generate cost savings and reductions in Scope 3 emissions through improved resource efficiency and waste reduction. Additionally, demonstrating strong supply chain sustainability can attract eco-conscious customers and investors, driving growth and strengthening brand reputation.
• Value chain: Upstream value chain
• Time horizon: Medium-term, long-term
• Link to ESRS: E1 Climate change (Climate change mitigation), E5 Resource use and circular economy (Resource inflows)

Circular Economy

• Impacts: By designing products that are durable, repairable and recyclable, and by using recycled materials in the manufacture of products, Belimo can significantly contribute to the circular economy by reducing the demand for raw materials and conserving natural resources.
• Risks: Belimo faces financial risks in transitioning to a circular economy model, including increased costs associated with implementing eco-design principles and sourcing recycled materials. These costs could impact the Company's short-term profitability and require significant investment in research and development to innovate and adapt existing processes and products.
• Opportunities: Belimo can benefit from financial opportunities by embracing circular economy principles, generating cost savings through improved resource efficiency and reduced waste.
• Value chain: Entire value chain
• Time horizon: Medium-term, long-term
• Link to ESRS: E5 Resource use and circular economy (Resource inflows, Resource outflows, Waste)

Occupational Health, Safety & Wellbeing

• Impacts: Belimo’s operations could pose risks to the health and safety of its employees if strict occupational health and safety measures are not strictly maintained. This includes potential workplace accidents, exposure to hazardous materials, and stress-related health issues.
• Risks: Belimo faces financial risks if it fails to maintain rigorous occupational health and safety standards. Workplace accidents or health issues can lead to operational disruptions, legal liabilities, compensation claims, and fines. Moreover, inadequate health and safety practices can harm Belimo’s reputation, leading to higher employee turnover, lower productivity, and loss of investor and customer confidence.
• Opportunities: A safe and healthy work environment can increase employee productivity, reduce absenteeism, and lower turnover rates. Additionally, robust health and safety practices can enhance Belimo's reputation, attracting top talent and investors who value corporate responsibility.
• Value chain: Own operations
• Time horizon: Short-term, medium-term
• Link to ESRS: S1 Own workforce (Working conditions; Health and Safety)

Talent Attraction, Development & Retention

• Impacts: By attracting top talent, Belimo can drive innovation in developing energy-efficient HVAC systems. Investing in talent development enhances research capabilities, leading to technological breakthroughs and improved practices. Effective strategies for talent attraction and retention create job opportunities, benefiting both local and global economies.
• Risks: Belimo faces financial risks if it fails to attract, develop, and retain skilled talent. High employee turnover increases recruitment and training costs, disrupts operations, and reduces overall productivity and quality due to continuous onboarding. Additionally, a lack of skilled talent can hinder innovation and reduce competitive advantage, negatively impacting the Group’s financial performance and growth.
• Opportunities: A skilled and engaged workforce drives innovation, improves productivity, and increases customer satisfaction. Strong talent management practices enhance Belimo's reputation as an employer of choice, attracting top talent and investors who value human capital development.
• Value chain: Own operations
• Time horizon: Medium-term, long-term
• Link to ESRS: S1 Own workforce (Equal treatment and opportunities for all) 

Social Responsibility & Human Rights in the Supply Chain 

• Impacts: Belimo's operations and supply chain activities may negatively impact human and labor rights, working conditions, and the health and safety of workers. If not properly monitored, there are risks of forced labor, child labor, and unsafe working conditions in the supply chain.
• Risks: Belimo faces financial risks if it fails to uphold social responsibility and traceability. Non-compliance with social responsibility standards (e.g., human rights and fair labor standards) can lead to legal penalties, supply chain disruptions, and significant reputational damage. These issues may cause financial losses due to potential lawsuits, increased scrutiny from regulators, and loss of investor and customer confidence.
• Opportunities: By ensuring fair labor practices and safe working conditions, Belimo can position itself as a preferred business partner, strengthening its reputation, building trust with customers and investors, and fostering stable supplier relationships. This can enhance customer loyalty and attract socially conscious investors.
• Value chain: Own operations, Upstream value chain
• Time horizon: Medium-term, long-term
• Link to ESRS: S2 Workers in the value chain (Working conditions)

Occupants’ Health, Safety & Wellbeing

• Impacts: If not properly installed or maintained, Belimo’s HVAC components could compromise occupants' health and safety by failing to adequately control indoor air quality, potentially leading to increased exposure to pollutants and poor air circulation.
• Risks: Belimo faces financial risks if its HVAC components do not meet health and safety standards, potentially leading to product recalls, legal liabilities, fines, and reputational damage. Poor performance in enhancing indoor air quality and safety could result in loss of customer trust and market share.
• Opportunities: With growing demand for healthier indoor environments, Belimo can leverage this trend by providing innovative products that meet these needs, potentially increasing market share and revenue. Leadership in this area can also strengthen Belimo's brand and attract investment focused on sustainability and health.
• Value chain: Downstream value chain
• Time horizon: Short-term, medium-term, long-term
• Link to ESRS: S4 Consumers and end-users (Personal safety of consumers and / or end-users) 

Data Privacy & Cybersecurity

• Impacts: If robust measures are not maintained, sensitive information (e.g., employee records, customer data) could be compromised, potentially causing significant harm to individuals if their personal data is exposed.
• Risks: Cyber-attacks and data breaches can cause operational disruptions, legal penalties, costly remediation efforts, and reputational damage. Loss of sensitive data could result in customer distrust, lower sales, and potential lawsuits, all of which can negatively impact Belimo’s financial performance and stability.
• Opportunities: By maintaining high standards of data privacy and cybersecurity, Belimo can protect against breaches and maintain customer trust.
• Value chain: Entire value chain
• Time horizon: Short-term, medium-term
• Link to ESRS: G1 Business conduct

Digitalization

• Impacts: Digitalization and automation enable predictive maintenance, prevent equipment failures, and increase efficiency, ultimately benefiting customers, suppliers, and employees by improving performance.
• Risks: Inefficient or poorly implemented digitalization efforts can result in increased costs, operational disruptions, and missed opportunities for productivity gains. Falling behind in digital innovation can erode Belimo’s competitive advantage and market share, adversely impacting financial performance.
• Opportunities: Leveraging advanced data analytics, predictive maintenance, and automation can drive cost savings, improve operational efficiency, and enhance product reliability. These advancements can attract new customers, improve service delivery, and strengthen market position, driving revenue growth and profitability.
• Value chain: Entire value chain
• Time horizon: Short-term, medium-term
• Link to ESRS: G1 Business conduct 

Innovation & Solution Leadership

• Impacts: Belimo's commitment to innovation and solution leadership can have significant positive impacts, such as advancing industry standards, and delivering sustainable solutions that benefit both the environment and its users.
• Risks: Falling behind in technological advancements can cause Belimo to lose its position in innovation and solution development, potentially leading to a loss of market share, decreased revenue, and diminished competitive advantage.
• Opportunities: Pioneering new technologies and anticipating customer needs can drive revenue growth, expand market share, and enhance the company's reputation in innovative solutions.
• Value chain: Upstream and downstream value chain
• Time horizon: Medium-term, long-term
• Link to ESRS: E1 Climate change (Climate change mitigation), S4 Consumers and end-users (Personal safety of consumers and end-users), G1 Business conduct

Product Quality, Safety & Compliance

• Impacts: Belimo's products could negatively affect stakeholders if product quality, safety, and compliance are not rigorously maintained. Product malfunctions could pose risks to occupants‘ health and safety or result in negative environmental impacts in case of leaks or emissions.
• Risks: Non-compliance with product quality, safety, and compliance standards or failure in product performance can result in costly recalls, legal penalties, and damage to the company’s reputation. These issues can lead to significant financial losses, decreased customer trust, reduced market share, reputational damage, and decreased investor confidence.
• Opportunities: Consistently delivering high-quality, safe, and compliant products can differentiate Belimo from competitors, attract new customers, and foster investor confidence.
• Value chain: Entire value chain
• Time horizon: Short-term, medium-term, long-term
• Link to ESRS: S4 Consumers and end-users (Personal safety of consumers and/or end-users), G1 Business conduct

Outlook

To ensure alignment between the sustainability strategy, sustainability reporting and stakeholder and regulatory expectations, Belimo will review its double materiality assessment and the identified material sustainability topics on a regular basis. While not all material topics are currently addressed at the same level of maturity, Belimo is actively working on its sustainability program to address these topics in the future.