Decarbonization Strategies and Scenario Analyses

A science-based decarbonization strategy is guided by current findings from climate science and aligns a company's emission reduction targets with the global carbon budget. It forms the well-founded basis for a systematic transformation process toward climate neutrality. Scientific Foundation: Orientation toward findings of the IPCC (Intergovernmental Panel on Climate Change) Alignment of corporate targets with the remaining global CO₂ budget Consideration of sector-specific decarbonization pathways Differentiation by Scope 1, 2, and

3 emissions in accordance with the GHG Protocol Adherence to the 1.5°C or well-below-2°C target of the Paris Agreement Key Elements: Comprehensive greenhouse gas inventory as a starting point (carbon footprint) Clearly defined, quantifiable reduction targets with time horizons Differentiation between short-, medium-, and long-term targets Validation of targets through external standards (e.g., Science Based Targets initiative) Consideration of Scope

3 emissions across the entire value chain Methodological Approaches: Absolute Contraction Method: Absolute reduction of emissions by a defined percentage Sectoral Decarbonization Approach: Orientation.

A comprehensive carbon footprint analysis forms the basis of every effective decarbonization strategy. It enables the systematic capture of all relevant greenhouse gas emissions of a company and serves as the starting point for identifying reduction potentials and developing targeted measures. Methodological Foundations: Application of international standards such as the GHG Protocol or ISO

14064 Capture of all relevant greenhouse gases (CO₂, CH₄, N₂O, etc.) in CO₂ equivalents Clear definition of system boundaries and the reporting period Differentiation between direct and indirect emissions (Scope 1, 2, and 3) Selection of an appropriate base year for comparisons and target-setting Capture by Emission Source: Scope 1: Direct emissions from own facilities and vehicles Scope 2: Indirect emissions from purchased energy (electricity, heat, cooling) Scope 3: Indirect emissions in the upstream and downstream value chain Differentiation by activities and business units Consideration of product life cycles in product-related analyses Data Collection and Quality: Combination of primary and secondary.

Climate scenarios form the basis for meaningful scenario analyses to assess climate-related risks and opportunities. They describe possible future development pathways with respect to emissions, climate policy, technology development, and societal transformation, and enable the structured analysis of impacts on companies and business models. IPCC Scenarios: Representative Concentration Pathways (RCPs): Scenarios for various greenhouse gas concentrations RCP2.6: Ambitious mitigation scenario, compatible with the 1.5–2°C target RCP4.5: Intermediate mitigation scenario with stabilization of emissions RCP8.5: Scenario without additional climate protection measures ("business-as-usual") Shared Socioeconomic Pathways (SSPs): Complementary socioeconomic development pathways IEA Scenarios (International Energy Agency): Net Zero Emissions by

2050 (NZE): Pathway to global net zero by

2050 Sustainable Development Scenario (SDS): Fulfillment of sustainability goals including the Paris Agreement Announced Pledges Scenario (APS): Implementation of all announced national climate targets Stated Policies Scenario (STEPS): Consideration of existing policy measures only Current Policies Scenario (CPS): Continuation of current policies without further measures NGFS Scenarios (Network for.

Climate scenario analyses in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) are a key instrument for the forward-looking assessment of climate-related risks and opportunities. They enable companies to systematically analyze the potential impacts of various climate pathways on their business model, strategy, and financial performance. Fundamental TCFD Requirements: Use of various climate scenarios, including at least one 2°C-or-lower scenario Consideration of both physical and transition climate risks Assessment of short-, medium-, and long-term time horizons Quantitative and qualitative evaluation of impacts on the business model Presentation of the resilience of the corporate strategy under various scenarios Methodological Process: Definition of the scope and objectives of the scenario analysis Selection of appropriate climate scenarios (e.g., IEA, NGFS, IPCC) for the specific question Identification of relevant risks and opportunities in each scenario Assessment of impacts on business units, markets, and value chains Derivation of strategic implications and potential adaptation measures Analysis.

The identification and prioritization of concrete decarbonization measures is critical for a cost-efficient and effective implementation of climate strategies. A structured approach helps companies find the most suitable measures for their specific context and implement them in a meaningful sequence.

🔍 Identification of Reduction Potentials:

⚖ ️ Evaluation Criteria for Measures:

📊 Prioritization Methods:

🗓 ️ Temporal Structuring and Roadmap:

Climate transition risks arise from the shift to a low-carbon economy and can have significant strategic, financial, and operational impacts on companies. The early identification and management of these risks is critical for the long-term competitiveness and resilience of companies in a changing economic landscape.

📜 Regulatory Risks:

💰 Market and Technology Risks:

👥 Reputational and Stakeholder Risks:

🏦 Financing and Capital Market Risks:

The climate transition offers companies numerous opportunities that go beyond mere risk minimization. Proactive companies can generate competitive advantages and unlock new business opportunities in a low-carbon economy through effective approaches and strategic positioning.

💡 Product Innovation and New Markets:

💹 Cost Advantages and Efficiency Gains:

🤝 Stakeholder Relations and Reputation:

🔄 Strategic Positioning and Resilience:

Effective climate risk management in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) systematically integrates climate-related aspects into existing risk management processes. It enables companies to identify, assess, and manage climate-related risks and opportunities in a structured manner.

🏛 ️ Governance Structures:

🔄 Processes and Methods:

📊 Management Instruments:

📝 Reporting and Transparency:

A net-zero strategy defines a company's pathway to climate neutrality and thus goes beyond pure emission reduction measures. A science-based and credible net-zero strategy requires a systematic approach that encompasses both the deep decarbonization of the company's own business model and the management of unavoidable residual emissions. Definition of Net-Zero Targets: Establishment of a clear target year for achieving net-zero emissions Alignment with recognized standards such as the SBTi Net-Zero Standard Distinction between near-term targets (5–10 years) and long-term targets Definition of scope (Scope 1, 2, 3) and coverage of emission sources Setting of interim targets for progress monitoring Focus on Emission Reduction: Prioritization of substantial emission reductions within the company's own sphere of influence Development of concrete measures for deep decarbonization Inclusion of the entire value chain, particularly for Scope

3 emissions Consideration of the extent of necessary reductions (90–95% according to SBTi) Clear distinction between reduction and compensation measures Management of Unavoidable Residual.

Various technologies play a decisive role in the successful implementation of decarbonization strategies. Depending on the industry, emission profile, and specific context of a company, different technologies may be relevant and can be combined within a comprehensive decarbonization strategy. Energy Generation and Procurement: Renewable energy sources such as solar, wind, and hydropower Power Purchase Agreements (PPAs) for green electricity Energy storage technologies such as batteries and pumped storage Green hydrogen and synthetic fuels Combined heat and power and heat recovery Industrial Processes and Production: Electrification of heat and production processes Process optimization and intensification for efficiency improvements Hydrogen-based direct reduction in the steel industry Alternative binders and low-carbon construction materials Carbon Capture and Utilization (CCU) for unavoidable process emissions Buildings and Infrastructure: High-efficiency heat pumps for heating and cooling Building automation and intelligent energy management systems District heating and cooling networks using renewable energy Energy-efficient retrofitting and passive house technologies Green building concepts and sustainable.

Scope

3 emissions — the indirect emissions along the value chain — account for the majority of the carbon footprint at many companies. Integrating this complex emission category into decarbonization strategies is therefore critical for an effective climate strategy, yet it presents companies with particular challenges. Capture and Analysis of Scope

3 Emissions: Categorization in accordance with the GHG Protocol (

15 Scope

3 categories) Screening and materiality analysis to identify relevant categories Combination of various data sources (primary data, secondary data, models) Hot-spot analysis to identify the key emission sources Regular refinement of data quality and calculation methods Engagement of Suppliers and Partners: Development of a systematic supplier engagement program Establishment of climate requirements in procurement policies and contracts Support for suppliers in developing their own climate targets Capacity building and provision of tools for suppliers Joint projects and initiatives for emission reduction Strategies for Reducing Scope

3 Emissions: Product design and material selection (design-to-value,.

Data gaps represent a central challenge in conducting meaningful climate scenario analyses. A structured approach to incomplete or uncertain data is essential to achieve solid and decision-relevant results despite these limitations.

🔍 Identification and Assessment of Data Gaps:

🛠 ️ Methodological Approaches to Handling Data Gaps:

👥 Use of External Expertise and Sources:

📊 Transparency and Communication:

Integrating climate aspects into corporate strategy is critical for successful decarbonization. It enables climate-related risks and opportunities to be systematically incorporated into strategic decisions and climate targets to be aligned with overarching business objectives.

🏛 ️ Strategic Anchoring of Climate Targets:

📊 Strategic Analysis and Planning:

💼 Integration into Business Processes and Decisions:

👥 Organizational Integration and Change Management:

Sector-specific decarbonization strategies take into account the particular challenges, opportunities, and structural conditions of individual economic sectors. They enable targeted measures tailored to the specific emission sources and transformation pathways of the respective industry.

🏭 Analysis of Sector-Specific Emission Patterns:

3 emissions

🛣 ️ Sector-Specific Transformation Pathways:

⚖ ️ Consideration of Regulatory and Market Conditions:

🤝 Collaborative Approaches and Industry Initiatives:

Physical climate risks already affect companies worldwide today and will continue to increase in the future. Systematically accounting for these risks in corporate strategies enables companies to strengthen their resilience and remain competitive in the long term.

🌦 ️ Categorization of Physical Climate Risks:

🔍 Analysis and Assessment of Physical Climate Risks:

🛡 ️ Risk Mitigation and Adaptation Strategies:

📋 Integration into Corporate Governance and Processes:

Regulatory developments in the area of climate protection and sustainability have a significant influence on companies and their decarbonization strategies. A forward-looking understanding of these developments is critical for minimizing regulatory risks and capitalizing on strategic opportunities.

🇪

🇺 Key EU Regulations and Initiatives: European Green Deal as the overarching framework for EU climate policy EU

2030 climate target (at least 55% reduction) and climate neutrality by

2050 EU Emissions Trading System (EU ETS) and reform (ETS II for buildings and transport) Corporate Sustainability Reporting Directive (CSRD) for sustainability reporting EU Taxonomy for the classification of sustainable economic activities National Climate Policy and Legislation: National climate protection laws with binding sector targets CO₂ pricing and national emissions trading systems Sector-specific regulations (e.g., for energy, mobility, buildings) Funding programs and incentives for climate-friendly investments National sustainability reporting obligations Reporting and Disclosure Obligations: Task Force on Climate-related Financial Disclosures (TCFD) as a global standard Obligation to conduct climate.

Successful communication of the decarbonization strategy is critical for acceptance among internal and external stakeholders and for the company's credibility in the climate context. Transparent and consistent communication can also enhance the reputational value of climate engagement.

📣 Core Principles of Effective Climate Communication:

👥 Target Group-Specific Communication:

📊 Content Elements of Climate Communication:

📝 Communication Formats and Channels:

Systematically measuring and monitoring the progress of a decarbonization strategy is critical for its effectiveness and continuous improvement. Solid monitoring enables companies to track target achievement, identify deviations at an early stage, and take corrective action where necessary.

📊 Development of Meaningful KPIs:

🔄 Establishment of a Systematic Monitoring Process:

📈 Tracking and Assessment of Progress:

🔍 Data Management and Tools:

Financing decarbonization measures is a central challenge for companies on the path to climate neutrality. A strategic approach to financing enables companies to make the necessary investments while simultaneously realizing economic benefits.

💰 Internal Financing Strategies:

🏦 External Financing Sources:

📊 Business Case Development for Climate Investments:

⚖ ️ Prioritization and Portfolio Approach:

The successful implementation of decarbonization strategies requires the active involvement and support of employees at all levels. Systematic employee engagement not only promotes acceptance of the climate strategy, but also mobilizes valuable knowledge and commitment for effective solutions.

👥 Mobilization and Awareness Building:

💡 Activation of Creativity and Innovation:

🔄 Integration into Daily Work Processes:

🎯 Incentives and Motivation: