Risk management: climate-related risks and opportunities
We maintain a comprehensive risk management system with clear definitions and processes, covering a broad range of aspects. This includes a regular review of the risks and opportunities for each division and for the central functions, in accordance with the Enterprise Risk Management (ERM) Policy of the Group. The policy’s intent is to establish the governance, methodology and process to proactively identify, assess, and mitigate the key risks to Comet and thus to ensure the resilience and success of our operations. In 2025, we will extend this exercise to all subsidiaries.
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 Extended Executive Committee. 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.
For risks that are classified as significant, we develop action plans to reduce both the probability of occurrence and the severity of potential damage. The Executive Committee regularly reviews both 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.
In particular, we systematically consider climate-related aspects, implementing the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) as required by Swiss law. Climate-related risks and opportunities and their impacts on our business model are re-evaluated on an annual basis and validated by the Sustainability Board.
The TCFD recommendations differentiate between climate-related physical and transition risks as well as associated opportunities. Chronic physical risks arise from climate-related weather patterns, such as rising temperatures or water scarcity, while acute physical risks are event-driven, including floods and storms. Physical risks can have direct financial consequences for us, such as damage to our assets. While they typically do not provide opportunities, they necessitate protective measures and corresponding financial investments. Further, the transition to a low-carbon economy may involve shifts in policy, legislation, technology, or market dynamics. Depending on the nature, pace, and scope of these changes, transition risks can pose varying levels of financial challenges for us. Conversely, proactive climate protection measures and strategic adaptation can create climate-related opportunities, unlocking competitive advantages for businesses.
Climate-related risks
In 2024, our Sustainability Board analyzed and reassessed the existing climate risks and opportunities identified in 2023 (see Annual Report 2023) in terms of their completeness, continuing validity, and relevance to identify the significant financial aspects related to climate change. While some minor adjustments regarding the assessment of impact and probability of occurrence were made, it was confirmed that climate-related risks do not currently rank among the top risks for the company. Furthermore, any relevant opportunities are long-term in nature, and their potential financial benefits are subject to significant uncertainty. As a result, a detailed financial assessment of such risks has not been conducted, as the low probability of such events and the adequate financial coverage of potential damages from climate-related physical occurrences mitigate the immediate need for further analysis.
We recognize the importance of energy management and are pursuing a strategy to strengthen our resilience in the energy procurement market. This strategy includes transitioning to the exclusive use of local and, wherever possible, renewable energy sources. If renewable sources are unavailable, we use clean-energy alternatives or compensate for greenhouse gas emissions through certificates of origin. We have already begun the changeover to renewable or clean electricity in recent years and plan to intensify these efforts soon. 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, USA, have switched completely to renewable or clean electricity. In 2024, we implemented guidelines for electricity procurement into the Group Purchasing Policy for Indirect Materials, Services and Equipment to harmonize and standardize the procurement of renewable or clean electricity at all sites.
In 2023, we launched an eco-design initiative, which includes an action plan, training, and life cycle assessments to better understand the CO2 footprint of our products. The aim is to continuously optimize the product portfolio while taking sustainability aspects into account, including investment in research and development. The details on the progress achieved in 2024 are presented in the section “Energy management and carbon emissions”.
Climate-related opportunities
The successful adaptation to climate change and implementation of mitigation measures can also open up opportunities for Comet and positively impact our competitive ability. In addition to the risks, Comet’s Sustainability Board has also revalidated two climate-related opportunities that could potentially have a significant financial or strategic impact on the company:
The global trends of electrification and digitalization are revolutionizing industries, driving the demand for ever more advanced, efficient, and reliable semiconductor chips. Applications like autonomous driving or smart grids demand exceptional reliability, as even a single chip defect can lead to severe consequences in safety-critical and mission-critical scenarios. The increasing complexity and miniaturization of chips elevate the risk of manufacturing defects, making comprehensive quality assurance essential to meet stringent reliability standards.
Outsourced Semiconductor Assembly and Test (OSAT) providers play a vital role in addressing these challenges. Their expertise in advanced packaging and rigorous testing ensures chips perform optimally while improving energy efficiency and reducing size. Projections indicate the OSAT market is poised to grow at a robust rate of around 8% over the next two to five years. In response to this growth, we are collaborating with a leading OSAT provider to develop innovative solutions that integrate energy-efficient monitoring into microchip packaging processes. While this project involves no financial risks, it offers significant opportunities to establish us as a product and technology leader in this rapidly expanding market.
Beyond semiconductors, opportunities are emerging in our traditional markets, such as automotive, aerospace, and security industries. By employing 100% x-ray inspection, the quality of manufactured parts can reach levels that enable a reduction in standard safety allowances during design. This optimization decreases material usage and energy consumption, contributing to more sustainable manufacturing practices while maintaining the highest safety standards.
Through these efforts, we continue to advance sustainability while driving innovation and strengthening our position across key industries.
Business resilience
To better understand the future consequences of evaluated risks and opportunities for our business model, we qualitatively considered climate scenarios to project our resilience to climate change-related developments. Climate scenarios offer hypothetical views of future conditions including variables such as greenhouse gas emissions, socio-economic development, technological advances, and policies. When implementing TCFD recommendations, we consider two scenarios:
- A “sustainability” scenario forecasts rapid and collaborative global climate transition in alignment with the goals of the Paris Agreement and is thus deemed to represent the most challenging conditions for a successful climate transition by Comet.
- In a “hot-house” scenario, socio-economic developments such as regional rivalry jeopardize a timely transition to a climate-friendly economy, resulting in global warming of up to 4°C toward the end of the century. In such a scenario, physical risks are expected to be most significant, as environmental conditions would likely be changed the most.
Based on our climate risk assessment, we believe that we are neither strongly exposed and vulnerable to transition risks in a sustainability scenario, nor to physical risks in a hot-house scenario. We thus believe that we have considerable resilience to developments in regulation, markets, and technology, as well as to intensifying environmental hazards.