Double materiality assessment

[IRO-1]

The Śnieżka Group applied a broad approach to the process of identifying and assessing material impacts, risks and opportunities, involving most stakeholders. This resulted in the creation of a broad database of information on impacts, both potential and negative, as well as risks and opportunities.

All procedures and policies related to the topics covered by the Sustainability Reporting area were analysed. The double materiality assessment is based primarily on a systematic analysis of the Group’s business model and value chain. By analysing impacts, risks and opportunities, their type was determined (positive or negative, actual or potential), place in the value chain, time horizon and stakeholders. Issues related to key activities, business relationships and resources throughout the value chain and in own operations were taken into account. Impacts and risks were assessed gross, i.e. prior to the application of mitigation measures. The full list of sustainability matters included in the topical ESRS (ESRS-1 AR 16) was analysed. The relationship of each topic, sub-topic and sub-sub-topics to the Group’s value chain and business model was assessed. At the beginning of the process, the value chain was analysed thoroughly by representatives of individual departments of the Śnieżka Group at three working meetings, during which, together with external ESG consultants, the upstream and downstream value chain was discussed, along with own operations and supporting activities.

The starting point for identifying negative impacts was a dialogue with stakeholders, including primarily employees (some of whom were also representatives of the local community) and key external stakeholders, as part of the due diligence process. The method for obtaining opinions and conclusions from stakeholders in order to better understand the Group’s impacts and related risks and opportunities was two anonymous surveys – one addressed to internal stakeholders (employees of all Group companies) and the other to external stakeholders (including customers, suppliers, institutional shareholders, banks, local governments).

The survey questions were both closed and open-ended and covered all areas of sustainable development, including impacts on the natural environment (noise, water and air pollution, improper waste management). They addressed issues identified in the international UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. Primarily, human rights covered by the Universal Declaration of Human Rights and the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work were taken into account.

The undertaking carefully analysed the sources of energy obtained for its own plants and the volume of emissions. Strategic plans resulting from sustainable energy extraction and production were taken into account. No significant changes to the business model are planned, but a linear evolution of existing processes and products, allowing for a balanced identification and assessment of impacts.

The surveys consisted of closed and open-ended questions, allowing respondents to provide more detailed explanations. They were addressed to internal and external stakeholders, both in Poland and abroad. Due to the international nature of the Group, stakeholders could complete the surveys in Polish, Hungarian, Ukrainian and Russian, and external stakeholders could also complete the surveys in English (due to the desire to include suppliers who speak only that language).

Descriptive responses in languages other than Polish or English were translated before their collective analysis was made, divided into employees and stakeholders of individual companies comprising the Śnieżka Group. A total of 459 responses from employees of FFiL Śnieżka SA, Śnieżka ToC, Śnieżka-Ukraina, Rafil, Poli-Farbe and Śnieżka-BelPol were analysed. 135 people responded to the survey for external stakeholders of the above entities.

Additionally, the results of an extensive consumer survey conducted by Śnieżka in 2024 were also considered, which allowed for learning about current consumer behaviour and preferences, including their approach to the issue of safety and the impact of paint products on the environment.

Based on the survey and study results, both negative and positive impacts on the Group and the associated risks and opportunities were identified. In making the assessment according to the criteria of scale, scope, irreversibility and likelihood, the relationship with specific human rights was taken into account.

The Group is aware of its potential impact on climate change and biodiversity and ecosystems, and the risks and opportunities related to these areas.

The undertaking analysed its environmental impacts and dependencies on the environment. Mutual relations were identified primarily in terms of:

direct exploitation of natural resources,
dependence on ecosystem services,
impacts on protected areas and endangered species.

All analyses were conducted considering specific locations of own operations or with less geographical precision (resulting from limitations in the traceability of sources of raw materials and places of use of products), also for upstream and downstream value chain. Additionally, key natural resources and their related operations and emissions were identified. Qualitative assessment criteria (the nature of protected areas, the status of endangered species, the overall harmfulness of emissions and the relative consequences of extracted resources) and quantitative criteria (the volume of abstractions, exploitation and emissions) were used. Numerous reference databases were used to provide a point of reference for objective support of the analysis.

The analysis identified protected areas in the vicinity of the Group’s facilities (the Group does not conduct operations in protected areas or areas of particular importance for biodiversity) and the species inhabiting them. The Group’s activities were not found to have any actual impact on the deterioration of the condition of habitats or species inhabiting them, hence no need to implement mitigation measures was identified.

The results of the impact assessment were used in the process of identifying and assessing possible risks and opportunities. Ultimately, it was found that there were no material risks or opportunities in the described scope. During the assessment, consultations were carried out with local communities regarding their perception of the Group’s activities, impacts and dependencies on the environment in their immediate vicinity. The impact on the availability of drinking water was identified, which is addressed in the strategic directions of Śnieżka, taking into account the efforts to limit withdrawal, close the water cycle and reduce pollution.

The IPCC SSP5-8.5 high-emission scenario was subjected to a detailed analysis, assuming increasing social and income inequality, continued reliance of the economy on fossil fuels and low decarbonisation, and an increase in greenhouse gas emissions. This scenario took into consideration both sudden physical risks, such as floods, and current risks, such as gradual soil degradation. The 2050 net-zero emissions scenario sets out a pathway to limiting temperature increase to 1.5°C through a net-zero global energy sector. This scenario analyses the Group’s business model and its potential for adaptation in terms of implementing the assumptions of the Paris Agreement. The strategy and business model were assessed in the face of various risks. Resilience to changes in customer and business partner behaviour, the need to adapt products to new regulations and technological trends in the field of zero-emission solutions, and reputational issues, such as potential stigmatization of the sector, were assessed.

The probability of risks occurring for specific geospatial coordinates across the entire value chain was assessed. For those risks that were identified with at least a very low probability of occurrence, potential impacts were outlined. These effects do not take into account the remedial measures and mitigation actions already taken. Material risks and opportunities were then identified, considering strategic plans, also related to sustainable energy acquisition and production and emission levels.

When considering the impacts, risks and opportunities in the area of pollution, the Śnieżka Group took into account the specific nature of the products manufactured (including water-based solvent products), production processes and the related waste disposal, as well as the manner the products are used by consumers. It considered both the types and characteristics of substances in its products and the pollutants released into the air (especially volatile organic compounds), identifying impacts in its own operations and in the downstream value chain taking advantage of its own measurements.

Material impacts on air pollution were identified throughout the value chain, as well as impacts arising from the use of potentially hazardous substances. Furthermore, opportunities can be observed a result of manufacturing of water-based products.

The Group assessed the identified environmental and social impacts against criteria aligned with the standards, i.e. severity and likelihood for negative impacts, and scale, scope and likelihood for positive impacts. The materiality hierarchy was established using a five-point scale based on qualitative or quantitative thresholds and, in the case of risks and opportunities, also financial thresholds using the Group’s internal risk assessment system, consistent with the system used for pricing corporate risks, and considering additional costs in the event of certain risks materialising¹. In order to determine the scale, the studies developed by international organizations (e.g. the International Energy Agency), sector-specific studies, scientific articles, standards provided for in legal regulations, various tools (e.g. the Integrated Biodiversity Assessment Tool (IBAT), Aqueduct Water Risk Atlas, which enabled basing on river basins, taking into account water bodies, were used.

_{¹ More information on this can be found in the Sustainability Management section in this chapter.}

The assessment also used Biodiversity Water Risk, Encore Nature (the Group uses the upper Vistula, Bug, Middle Dnieper and Danube river basins). Other statistics published, for example, by the Central Statistical Office were also used. It was assumed that the tools listed accurately reflect the Group’s business profile. The assessments were made by representatives of the Śnieżka Group, specializing in particular thematic fields. Once all assessments had been internally validated, they were compared, allowing for the selection of material sustainability issues.

The Śnieżka Group identifies its revenues as resulting from the extraction of natural resources, mainly water, but also minerals such as calcium carbonate. At the same time, the specificity of the products requires the use of packaging which – as waste – is difficult to recycle. The undertaking identifies its main related entities as those involved in the extraction of raw materials, water treatment, packaging production and waste treatment. The concentration of resource use takes place in own operations.

Representatives from all key areas of the Group’s operations participated in the process to identify and assess material impacts, material risks and material opportunities. The work group was represented by management staff responsible for, inter alia, ESG, environmental and climate protection, human resources, compliance, risk management, IT, production, research and development, logistics, sales, purchasing, marketing, customer service and product development. In conducting the dual materiality assessment, the Group was supported by external experts in the areas of environmental protection, social impact and non-financial reporting. Several meetings were arranged, including key workshops on the value chain, the dual materiality assessment (including scenario assessment) and the due diligence process. The identified and then assessed impacts, risks and opportunities were subjected to cross-cutting verification in the Group in order to obtain a broader perspective from the point of view of all key areas of the Group’s operation. The assessment results, including a list of material impacts, risks and opportunities, were accepted by the Management Board and the Supervisory Board.

The ESRS-compliant double materiality assessment was conducted between June and October 2024. Within the Group, the double materiality assessment was conducted in accordance with the ESRS Standards for the first time, whereas previously, in January 2024, the double materiality assessment was carried out based on the ESRS. The identification and assessment process is dynamic and will be subject to continuous improvement in response to changing market and regulatory conditions. The Group assumes that the double materiality assessment will be reviewed annually to take into account new information and changes in the market environment.

Material impacts, risks and opportunities

Taxonomy disclosures