Climate reporting
In the sustainability report for 2023, Comet is publishing information on climate-related risks and opportunities for the first time, in accordance with the requirements of the Task Force on Climate-related Financial Disclosures (TCFD). The reporting covers the identified physical and transition risks and opportunities that could affect Comet’s business model. The governance structure, strategy, risk management process and relevant key performance indicators are also stated. These elements serve to overcome challenges related to climate change, mitigate potential negative financial impacts and leverage potential benefits.
Governance
The Board of Directors oversees and approves the sustainability strategy, including its climate-related aspects. It is also responsible for overseeing and directing the development of a climate action plan. Climate issues, like Comet’s other material topics, are discussed by the Board of Directors on a quarterly basis as part of the business transformation agenda. In addition, climate risks will be integrated into the deliberation on business risks from 2024. Their discussion and review are on the agenda of the Board of Directors at least twice a year. A detailed description can be found in the “Governance and organization” section of this report.
Strategy
In 2021, Comet launched a formal, Group-wide sustainability initiative that also includes climate-related aspects. Part of this initiative is a climate action roadmap to guide Comet in analyzing and reporting its greenhouse gas emissions in detail. The aim is also to review scenarios for reducing these emissions and to set ambitious targets in line with the Science-Based Targets Initiative (SBTi). Specific action measures have been adopted to achieve these goals, including the development of a climate action roadmap and the initiation of a group-wide eco-design project.
In 2024, Comet will further develop the climate action roadmap in a top-down process. We already implemented various initiatives in 2023 using a bottom-up approach. This included reporting on Scope 1 and Scope 2 emissions, setting initial targets for Scope 2 emissions, obtaining a first estimate of Scope 3 emissions, and various measures to reduce the carbon footprint. The intended step of committing to the goals of the Science-Based Targets initiative has been postponed until the end of 2024 in order to gain a deeper understanding of the potential to reduce emissions in the value chain before the targets are submitted.
Comet is conscious of the urgency of climate action. However, we also recognize that the commitment to medium-term, science-based targets (SBTs) and the achievement of net zero emissions in the long term can only realized by continually overcoming numerous challenges. These include reducing CO2 emissions when purchasing materials and when customers use our products. Achieving progress in this area requires close collaboration with customers, partners and suppliers.
Focus on analysis and initial implementation measures
To tackle the challenges of climate change and reduce our CO2 emissions, the following measures will be the most important components of our action plan.
Six main drivers to reduce our carbon footprint:
In our operations we have carried out various initiatives in recent years. For example, our own plant in Flamatt, Switzerland, is operated on 100% renewable electricity. At our leased sites, in Hamburg, Germany, and San Jose, California, we also purchase completely renewable electricity from the landlords.
With regard to Scope 3 emissions, we reviewed the initial findings from the previous year and, on this basis, expanded the categories with the greatest impact on Comet’s greenhouse gas (GHG) emissions. This process led to the conclusion that seven of the 15 Scope 3 emission categories are responsible for the majority of GHG emissions:
- Category 1 – Purchased goods and services
- Category 2 – Capital goods
- Category 4 – Upstream transportation and distribution
- Category 6 – Business travel
- Category 7 – Employee commuting
- Category 9 – Downstream transportation and distribution
- Category 11 – Use of sold products
Based on a previous analysis, Comet has carried out an initial Scope 3 screening. For what we consider to be the most important categories, we estimated the approximate greenhouse gas emissions using a spend-based economic input-output method. This screening revealed that the Scope 3 emissions of approximately 61,000 tons of CO2 equivalent account for about 90% of the total emissions directly or indirectly caused by Comet. Further work to calculate Scope 3 emissions more precisely is planned for 2024 in order to achieve higher transparency and data quality. Based on this refined database, Comet intends to develop initiatives to reduce Scope 3 emissions.
Climate-related physical risks and transition risks
Comet differentiates between physical and transition climate risks, in accordance with the guidelines of the Task Force on Climate-related Financial Disclosures. Physical risks result from direct climate events and have a direct impact on Comet’s business activities. Transition risks, on the other hand, arise from the gradual decarbonization of the economy or from changes in the legal, social, economic and technological environment. The most significant risks for Comet include:
|
Risk |
Characterization |
Description |
|
|
|
|
|
|
|
Disruption of the supply chain due to natural disasters |
• |
Acute physical risk |
As part of the manufacturing industry, Comet is dependent on a supply of raw materials and intermediate goods for its products. Climate change is expected to lead to an increased likelihood of storms and natural disasters, which could cause temporary disruptions to supply chains. |
|
• |
Upstream value chain |
||
|
• |
Short-term time horizon |
||
|
• |
Very likely to occur |
||
|
• |
Low to medium impact expected |
||
|
|
|
|
|
|
|
|
|
|
|
Impact of storms and other extreme weather events on Comet sites |
• |
Acute physical risk |
Some of the company’s sites are located in the Northwest Pacific region, a hot spot for tropical storms. Climate change could lead to an increase in typhoons and other extreme weather events, which would expose these locations to increased risk of damage. |
|
• |
Upstream value chain |
||
|
• |
Short-term time horizon |
||
|
• |
Very likely to occur |
||
|
• |
Low to medium impact expected |
||
|
|
|
|
|
|
|
|
|
|
|
Rising costs for raw materials and intermediate goods |
• |
Transition risk |
Comet uses highly specific materials to manufacture its products. Due to changing ESG or climate-related regulations, including additional CO2 taxes impacting global supply chains, the cost of raw materials could increase, which would pose a financial risk. In addition, the availability of certain raw materials could be limited due to geopolitical circumstances. |
|
• |
Upstream value chain |
||
|
• |
Short to medium-term time horizon |
||
|
• |
Very likely to occur |
||
|
• |
Medium impact expected |
||
|
|
|
|
|
|
|
|
|
|
|
Regulation of existing products and services |
• |
Transition risk |
Stricter regulations could pose a risk to the sale of Comet’s existing products and services. For example, the European Ecodesign Directive sets environmental performance requirements for the design of energy-using products. |
|
• |
Downstream value chain |
||
|
• |
Medium-term time horizon |
||
|
• |
Likely to occur |
||
|
• |
Medium impact expected |
||
|
|
|
|
|
|
|
|
|
|
|
Customer demands for a reduction in CO2 emissions from products and the transition to energy from renewable sources |
• |
Transition risk |
The semiconductor industry, which accounts for over 70% of Comet’s net sales, is resource-intensive and generates significant CO2 emissions. Comet’s customers are therefore striving to reduce CO2 emissions in their upstream value chain. Should Comet not participate in these efforts, it could lead to a loss of business opportunities. |
|
• |
Downstream value chain |
||
|
• |
Short to medium-term time horizon |
||
|
• |
Very likely to occur |
||
|
• |
Low impact expected |
||
|
|
|
|
|
|
|
|
|
|
|
Reputation risk: Public demand for continuous review of climate risks and publication of the results of the analyses |
• |
Transition risk |
Reputational risk becomes relevant if interest groups, including investors, react inappropriately to the company’s response to climate risk or to its disclosure of information. Such reactions can have a financial impact; for instance, by making it more difficult to raise capital or leading to the loss of business opportunities. |
|
• |
Medium to long-term time horizon |
||
|
• |
Unlikely to occur |
||
|
• |
Low impact expected |
||
|
|
|
|
|
Strategic elements for enhancing climate-related risks for Comet’s business
Comet expects that the downstream transition risks resulting from the shift to a low-carbon economy will have an impact on Comet’s business, particularly with regard to the entire semiconductor industry. However, these developments have medium-to long-term relevance, which is why they are not currently a high priority for Comet. Nonetheless, Comet plans to carry out a more detailed analysis of climate-related scenarios in order to gain a deeper understanding of the climate-related risks.
In 2023, Comet launched an ecodesign initiative, which includes an action plan, training and life cycle assessments to better understand the CO2 footprint of the products. The aim is to continuously optimize the product portfolio while taking sustainability aspects into account, including investment in research and development.
Climate-related opportunities
In addition to the risks, Comet has also identified two climate-related opportunities that could potentially have a significant financial or strategic impact on the company.
|
Opportunity |
Characterization |
|
Description |
|
|
|
|
|
|
Increased demand for products and services |
• |
Downstream value chain |
X-ray systems are attracting growing interest in the manufacturing processes of the semiconductor advanced packaging sector as well as in the other major industries that Comet serves. These include the automotive, aerospace and security markets. In all these sectors, x-ray systems lead to an improvement in production processes. Moreover, with 100% x-ray inspection, the quality of the manufactured parts themselves can also be improved to such an extent that standard safety factors in the design calculations can be reduced. This reduces material and energy consumption. The growing recognition of the climate issue should therefore lead to higher demand for Comet’s products in the medium term. |
|
• |
Medium to long-term time horizon |
||
|
• |
Medium to high impact expected |
||
|
|
|
|
|
|
|
|
|
|
|
Resilience in energy procurement |
• |
Upstream value chain |
The procurement of local, renewable energy reduces dependence on the global energy market dominated by fossil fuels, meets modern social and industrial climate expectations and contributes to climate action. |
|
• |
Medium-term time horizon |
||
|
• |
Low to medium impact expected |
||
|
|
|
|
|
Strategic elements for enhancing climate-related opportunities for Comet’s business
Based on expert projections, Comet expects the OSAT market (Outsourced Assembly and Testing) to grow strongly by around 8% over the next two to five years. In response, Comet is working closely with a leading OSAT company to develop innovative solutions for integrating energy-efficient x-ray monitoring into microchip packaging processes. Although this project does not entail any financial risks, it offers significant opportunities for Comet to establish itself as a product and technology leader in this expanding market. In addition, opportunities are opening up for Comet in its traditional markets, such as the automotive, aerospace and security industries. Applying 100% inspection using x-rays can improve the quality of the manufactured parts to the point that standard safety allowances in the design process can be reduced. This in turn leads to a reduction in material and energy consumption.
Comet has recognized the importance of energy management and is pursuing a strategy to strengthen its own resilience in the energy procurement market. This strategy includes the transition to the exclusive use of local, renewable energy sources. Comet has already begun the changeover to renewable electricity in recent years and plans to intensify these efforts in the near future. This strategic orientation is also reflected in the selection of new plants to be leased and in the collaboration with current lessors to drive forward the transition to renewable electricity. As a result of these efforts, the sites in Flamatt, Switzerland, Hamburg, Germany, and San Jose, California, have switched completely to renewable electricity. In the near term, Comet plans to implement a policy for electricity procurement in order to harmonize and standardize the procurement of renewable electricity at all sites.
Risk management
In 2024, Comet will integrate climate-related risks into its existing, multidisciplinary risk management process. This includes a regular review of the risk and opportunity assessment at each production site. Risks are identified for all time horizons in a top-down approach that covers the entire value chain from suppliers to customers. This identification is validated in collaboration with the divisional management and the site managers. The main risks are to be extracted, categorized in a matrix and assessed in terms of their probability of occurrence and the potential for harm. Comet plans to quantify the potential impact of these risks and opportunities in the near future.
For risks that are classified as significant, Comet develops action plans to reduce both the probability of occurrence and the severity of the potential damage. The Executive Committee regularly reviews the effectiveness of these action plans and the entire risk portfolio and decides on any necessary adjustments. The Executive Committee informs the Audit Committee and Board of Directors of its findings. The necessary risk management measures are discussed and decided at the top management level, after which implementation is delegated to the respective departments and/or locations. In addition, the results of the risk management process are incorporated into the annual review and approval of the business strategy by the Board of Directors and are integrated into the documented risk management process implemented by the Executive Committee.
Metrics and targets
Since 2021, Comet annually publishes key performance indicators on greenhouse gas emissions and its general sustainability performance in accordance with the GRI Standards. The climate-related indicators are presented within the Sustainability Report, in the section “Report in Accordance with GRI Standards”, under the heading “Environment”. Comet’s targets, too, are explained in the Sustainability Report, in the section “Climate action roadmap”, heading “Targets and priorities”.