Material impacts, risks and opportunities

[SBM-3]

The Śnieżka Group conducting business activities in the production sector, identifies the following impacts related to sustainable development:

  • on climate change through greenhouse gas emissions throughout the entire value chain and reduction of the carbon footprint in connection with the implementation of the adopted Sustainable Development Strategy,
  • on air and natural environment pollution in connection with the activities carried out in production facilities and the use of potentially hazardous substances,
  • on water resources in the locations where production facilities are located due to the significant water content in the Group’s products – its withdrawal from water supply systems may limit its availability in a given area,
  • due to the use of resources, the generation of waste and the production of products that cannot be reused or recycled,
  • on their own employees, in connection with the development opportunities offered and ensuring employment stability, but also in terms of occupational health and safety,
  • on local communities, due to the significant water content in the Group’s products – its withdrawal from water supply systems may limit its availability in a given area and in connection with the potential contamination of land with substances used in production facilities,
  • on consumers and end users due to the wide availability of the Group’s products in the markets it serves, including smaller towns,
  • on employees in the value chain regarding the lack of active communication of existing channels for reporting unethical behaviour.

No material impacts on biodiversity were identified.

In 2024, as part of the double materiality assessment, new material risks and opportunities were identified. None of these identified factors materialised during the same year, meaning that no direct financial impact occurred.

To assess the resilience of the strategy and business model to climate change, a scenario analysis was conducted, described later in this chapter.

Material impacts identified by the Śnieżka group in the double materiality assessment

The double materiality assessment identified over 62 impacts, of which a total of 21 were considered material, including 6 actual positive impacts, 9 actual negative impacts and 6 potential negative impacts. No potential positive impacts were identified.

The tables below indicate material impacts along with their place in the value chain and time horizon. A continuous perspective means that a given impact has been identified in the short, medium and long time horizon.

Other information necessary to understand the impacts is provided below the tables and in Environment, People and Business.

ESRS topic Description of material impacts Impact type Time horizon Place in value chain 
Climate change
E1		 Impact on the environment (on the structure of local energy mixes) due to the use of renewable energy sources. Actual positive Constant Own operations
Impact on climate change through greenhouse gas emissions from value chain operations. Actual negative Constant Entire value chain
Pollution
E2		 Impact on air quality through the use of volatile organic compounds in production and use processes in the value chain. Actual negative Constant Entire value chain
Impact on the natural environment and surroundings, through the use of substances and mixtures classified as potentially hazardous throughout the entire value chain, which, even handled with special care and used as intended, exhibit a number of hazards, including acute toxicity, mutagenicity or posing a hazard to the aquatic environment. Actual negative Constant Entire value chain
Water and marine resources
E3		 Impact on the availability of water resources and the condition of ecosystems due to increased water stress caused by water withdrawal. Actual negative Constant Own operations
Biodiversity and ecosystems
E4		 Impact on the ecosystem due to water withdrawal.  The undertaking, through material water withdrawal that is not discharged into the environment, negatively impacts the ecosystem. (availability of ecosystem services from the group Ground water used for nutrition, materials or energy) Actual negative Constant Own operations
Resource use and circular economy
E5		 Impact on the overall condition of the environment due to the generation of large amounts of waste. Actual negative Constant Own operations
Impact on the overall environment through the use of raw materials of natural and synthetic origin. Actual negative Constant Own operations
Impact on the overall environment by producing products that cannot be recycled or reused. Actual negative Constant Own operations

ESRS topic Description of material impacts Impact type Time horizon Place in value chain
Own workforce
S1		 Impact on gender equality – equal pay – by keeping the Gender Pay Gap below the European Union average. Actual positive Constant Own operations
The undertaking’s impact on employment security and stability. Actual positive Constant Own operations
Impact on employees by fostering work-life balance. Actual positive Constant Own operations
Impact on employees by providing opportunities for internal promotion and development. Actual positive Constant Own operations
The undertaking may negatively impact the safety and health of its employees in the event of a fatal accident. Potential negative Constant Own operations
The undertaking may negatively impact the safety and health of its employees in the event of a serious accident. Potential negative Constant Own operations
The undertaking may negatively impact the safety and health of its employees in the event of work-related illnesses. Potential negative Constant Own operations
Workers in the value chain
S2		 The undertaking may negatively impact external stakeholders due to the lack of active communication through existing channels for reporting unethical behaviour. Potential negative Constant Entire value chain
Affected communities
S3		 The undertaking relies on water-based products for its operations, consuming large volumes of water, which affects the level of water stress and therefore limits access to water for local communities. Actual negative Constant Entire value chain
Through its solvent-based products containing potentially hazardous compounds and mixtures, the undertaking may negatively impact land quality and consumer health due to improper waste storage or the emission of these compounds into the land. Potential negative Constant Own operations
Consumers and end users
S4		 The Group’s wide distribution channels enable physical products to reach consumers in smaller towns, allowing them to purchase products in local stores. Actual positive Constant Downstream

ESRS topic Description of material impacts Impact type Time horizon Place in value chain
Business conduct
G1		 The undertaking may impact employees due to the lack of active communication of existing channels for reporting unethical behaviour. Potential negative Constant Own operations

Material risks and opportunities identified by the Śnieżka group in the double materiality assessment

The double materiality assessment identified 36 risks and 19 opportunities, of which 10 risks and 4 opportunities were considered material. They are described in the table below along with their effects. The management of actual and anticipated impacts, including how to respond to them, is addressed later in the report under actions and objectives related to impacts, risks and opportunities.

Other information necessary to understand the risks and opportunities is provided below the tables and in chapters Environment, People and Business.

ESRS topic Description of risk or opportunity Time horizon Place in value chain
Climate change
E1		 Physical risk: the risk of asset damage due to the increasing likelihood of wildfires in Eastern and Central Europe due to rising average temperatures and drought. Long-term Own operations
Physical risk: the risk of asset damage as a result of increased frequency of extreme weather events such as severe storms, flooding, etc. Long-term Own operations
Transition risk: the risk of supply chain disruption due to partners’ failure to adapt to a changing climate, resulting in the inability to produce or deliver a product or service. Long-term Upstream
Transition risk: the risk related to an increase in the operating costs of buildings due to the need to meet environmental requirements regarding energy consumption. Long-term Own operations
Transition risk: the risk of incurring costs related to the implementation of low-emission technologies in own operations (energy sources, heating, etc.). Long-term Own operations
Transition risk: the risk of rising energy costs in a pessimistic scenario resulting from a range of possible events that make it more difficult to supply or produce energy. Medium Own operations
Transition risk: the risk associated with adapting one’s operations due to rising average global temperatures and extreme heat. Long-term Own operations
Transition risk: the risk of increased transport costs of raw materials, materials and finished products related to the need to modernize subcontractors’ transport fleets to low-emission standards. Long-term Entire value chain
An opportunity to increase cost control, including energy costs, in an undertaking by monitoring greenhouse gas emissions. Constant Own operations
Pollution
E2		 Opportunity: increasing the share of water-based products reduces water pollution and dependence on solvents, and thus has a positive impact on the environment, which may increase customer interest in the undertaking’s products. Constant Own operations
Water and marine resources
E3		 Risk of limitations in water withdrawal for production during, e.g. drought, resulting from legal regulations. Constant Upstream

ESRS topic Description of risk or opportunity Time horizon Place in value chain
Own workforce
S1		 An opportunity to provide a satisfactory, competitive remuneration can increase employee motivation and loyalty, which translates into lower turnover and savings associated with recruiting new employees. Long-term Own operations
An opportunity to create an innovative, creative and effective work environment by ensuring diversity among senior management. Long-term Own operations

ESRS topic Description of risk or opportunity Time horizon Place in value chain
Business conduct
G1		 Risk of corruption incidents affecting reputation and trust. Medium Entire value chain

The double materiality assessment stage was the resilience analysis of the strategy and business model to climate-related risks, carried out in Q2 of 2024. Its objective was to identify risks and opportunities assigned to specific links in the value chain. Three time horizons were adopted: short-term (<1 year), medium-term (1-10 years) and long-term (>10 years). These perspectives are consistent with the overall business planning framework, which typically has a 10-year horizon driven by asset durability, product life cycles and, consequently, capital allocation decisions. The Group does not currently have quantified decarbonisation targets.

The resilience analysis covered the Central and Eastern European region (primarily Poland, Ukraine and Hungary), i.e. the area where own and downstream operations are carried out (main sales markets). In the upstream area, the undertaking is not significantly dependent on a specific country or region, hence, in addition to the areas already analysed, the scope also covers the Far East regions (China).

It was assessed that sudden weather phenomena such as fires, storms, floods or landslides can lead to the destruction or damage of infrastructure that is essential from the point of view of the value chain – necessary for the extraction, processing or transport of raw materials and products and may contribute to disruptions in energy production. The consequences of the described events may be difficulties in current operations, leading to a decrease in income or share value. When adapting to climate change based on a zero-emission scenario, the Group recognises risks related to the effectiveness of implementing low-emission technologies, adapting products and services, modernising infrastructure and the fleet throughout the value chain to a low-emission model. Concurrently, the Group identifies opportunities related to adapting its strategy and business model to obtaining energy from renewable sources and developing even more innovative recipes.

In accordance with the assumptions of the business strategy, the Group takes actions aimed at the widest possible diversification of suppliers and ensuring the availability of substitute raw materials. The Group has several plants and warehouses, which allows for flexible adjustment of potential operations in the event of crisis situations. The Group makes every effort to ensure that energy comes from its own systems or renewable energy sources, which is confirmed by appropriate certificates. The Group strives to minimise its impact on the climate by constantly optimising its supply chain and modifying its recipes. No business areas or assets were identified that did not take into account the transition towards a climate-neutral economy.

There are no critical climate-related assumptions made in the financial statements.

The analysis used, i.a.:

  • net zero emissions scenario by 2050 of the International Energy Agency (this is one of several scenarios that has been selected as being consistent with limiting global temperature increase to 1.5 °C – with at least 50% probability – in line with the emission reductions assessed in the Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC)),
  • TCFD Guidelines for Scenario Analysis for Non-Financial Enterprises,
  • Intergovernmental Panel on Climate Change Climate Change 2021 The Physical Science Basis.

The scope of this report covers all persons working in the Śnieżka Group. The following categories have been distinguished within our own employee resources:

  • persons in an employment relationship with the Group companies,
  • persons cooperating under other agreements (civil law contracts or B2B contracts), including those working on behalf of an employment agency (non-employees).

Material potential negative impacts on employees in terms of occupational health and safety have been identified, which may materialise in the form of an accident (fatal/serious) or work-related illness.
This applies to all employees, but particularly to line workers. The accident indicators recorded so far in the Group allow it to predict that if negative impacts materialise, they will be of an individual nature.

The Group recognises that its identified material impacts in the area of ​​its own workforce resources apply to all of its employees. The positive impact of the undertaking on employment security and stability applies in particular to people employed in the Śnieżka-Ukraina company – due to the fact that the company operates in a country affected by war, which resulted in a decreased number of jobs.

None of the material impacts on employees result from the undertaking’s climate change transition plans.

The Group has not identified any risk of forced or child labour within its own operations in any region.
A material opportunity in the employee area related to a specific, narrow group of people is the development of an innovative, creative and effective work environment by ensuring diversity among senior management staff. The second opportunity identified is related to providing satisfactory remuneration. This applies to all staff employed within the Group.

The identified potential negative impact on people performing work in the value chain is related to the lack of active communication on how to report unethical behaviour.

Persons who may be at risk of this potential impact include:

  • employees of suppliers of raw materials and commercial goods to Śnieżka,
  • employees of entities rendering services,
  • persons working on the Group’s plant premises but employed by external entities.

The Group does not identify individuals who, due to e.g. age or gender, may be particularly vulnerable to the negative effects of this systemic impact.

There were no identified material positive impacts, risks or opportunities related to people performing work in the value chain, or risks or opportunities related to potential occurrences of child labour, forced or compulsory labour, including those related to a specific geographical area or goods offered.

The Śnieżka Group, in connection with the production and sale of decorative products, has identified two negative impacts on the affected communities:

  • actual – the undertaking bases its operations on water-based products, consuming large amounts of water, which affects the level of water stress and may therefore limit access to water for local communities (using the same water and sewage systems as the Group’s production facilities),
  • potential – through its solvent-based products containing potentially hazardous compounds and mixtures, the undertaking may negatively impact land quality and consumer health due to incorrect waste storage or emissions into the land through flushing.

Within the area of ​​operation, there are no identified community groups that are particularly exposed to the identified material negative impacts (considered to be widespread) or their effects. There were no identified material positive impacts, risks or opportunities related to people performing work in the value chain, or risks or opportunities related to potential occurrences of child labour, forced or compulsory labour, including those related to a specific geographical area or goods offered.

The Śnieżka Group considers consumers – users of the products offered – to be the end users on whom the undertaking has a material impact.  Due to the identified actual positive impact, the scope of this report primarily covers those end users who live in smaller towns (other than provincial capitals) where the availability of decorative products may be difficult due to the limited number of large-scale stores. The positive impact of the Śnieżka Group is possible owing to the sale of its products both to chains with stores in large cities and to customers conducting commercial activities in smaller towns. Additionally, the Group’s products can be purchased via online channels, with delivery to any location in Poland.

The products offered by the Group, when used as intended and in compliance with the required precautions provided on the labels, do not pose a health hazard and do not increase the risk of chronic diseases.

No material negative impacts, risks or opportunities related to customers and end users were identified.

Given that this report is the first to be prepared in full compliance with the ESRB standards, including the double materiality assessment, it is not possible to indicate any changes in the entity’s material impacts, risks and opportunities compared to the previous reporting period. The Management Board’s Report on the activities for 2023 includes non-financial risks identified in the simplified process, which partially overlap thematically with the issues described above.

In this report, the Group reports 2 disclosures that go beyond the topics identified in the ESRS standards as necessary to be included in the double materiality assessment which will be subject to assurance.

    • [W1] Greenhouse gas emissions in scope 1 and 2 calculated for FFiL Śnieżka SA and Śnieżka ToC in accordance with the requirements of the Greenhouse Gas Protocol.
    • [W2] Share of certified products manufactured by FFiL Śnieżka SA in sales revenues of Śnieżka ToC - calculated on the basis of reporting criteria developed by FFiL Śnieżka SA.
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