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PROTECTING THE PLANET

Sonova ESG Report 2021/22

Protecting the planet

We drive the transition to a resource-efficient and low-carbon future of our operations throughout the lifecycle of our products and services.

Sonova has made an explicit commitment to protecting the planet and pursuing environmentally friendly practices throughout the whole lifecycle of its products and across all its business activities. We set the priorities and provide the resources needed to reduce our environmental impact through responsible and efficient management of our buildings and infrastructure, processes, products, and services. This chapter comprises the following sections:

The “Protecting the planet” pillar of Sonova IntACT strategy sets clearly defined goals and targets which can be found throughout this chapter. We continuously monitor progress against these targets and optimize environmental performance across the Group. In 2021/22, we updated and enhanced our corporate environmental policy to reinforce our commitment to environmentally proactive behavior and define the company’s environmental management organization and responsibilities. As in previous years, no fines or non-monetary sanctions were levied against Sonova in 2021/22 for noncompliance with environmental laws or regulations.

All Sonova key manufacturing sites and distribution centers listed below have ISO 14001-certified environmental management systems (EMS), which require our employees to take environmental considerations into account when designing, manufacturing, and servicing products.

  • Sonova AG and Advanced Bionics AG (Stäfa, Switzerland)
  • Sonova Communications AG (Murten, Switzerland)
  • Sonova Operations Center Vietnam Co., Ltd. (Binh Duong, Vietnam)
  • Sonova Hearing (Suzhou) Co., Ltd. (Suzhou, China)
  • Sonova USA Inc. manufacturing and distribution centers (Warrenville/Aurora, USA)
  • Advanced Bionics LLC (Valencia, USA)

For non-manufacturing sites, Sonova has adapted its EMS to ensure that environmental factors are integrated in decision-making and that environmental performance continues to improve.

Many of Sonova’s employees are personally engaged in the topic of environmental sustainability; more local “green teams” have therefore formed during 2021/22. Our Wireless Competence Center in Murten, Switzerland has launched several green initiatives based on the voluntary engagement of our dedicated employees. This includes a collaboration with academia and other partner firms to find long-term paper-based materials to replace plastics in injection and thermoforming processes.

Energy and climate

Commitment and approach

The science is clear - climate change requires prompt, effective action from governments, industries, and individuals. Sonova acknowledges its responsibility and is committed to reducing its greenhouse gas (GHG) footprint. In the previous financial year, Sonova set the target of becoming carbon-neutral in its own operations (Scope 1+2 emissions) by the end of 2021. We are pleased to have achieved this target by reducing our energy consumption and increasing energy efficiency, switching to renewable energy sources, and offsetting unavoidable emissions. We are determined to remain carbon-neutral across our operations in 2022. We are committed to setting science based emissions targets for Scope 1, 2, and 3 emissions in alignment with the Science Based Targets initiative (SBTi). For Scope 1 and 2, we will align with the 1.5°C scenario and for Scope 3 with the well below 2°C scenario.

Since 2012, Sonova has cooperated with CDP (formerly the Carbon Disclosure Project), a non-profit organization that has established standards for companies to publish their environmental data and to score their environmental transparency and action. In 2021 Sonova improved its rating to the second highest possible ranking: A- leadership level, recognizing our transparency in environmental reporting and endeavors in climate change mitigation. The results are publicly available and accessible on the CDP website.

Energy

In 2021, the total energy consumption of the Sonova Group from heating (fuel oil, natural gas, biogas, district heating), electricity, and vehicle fuels (diesel, gasoline, liquefied petroleum gas, liquefied natural gas, ethanol) amounted to 100,035 megawatt-hours (MWh). Of this total, 47,988 MWh (48%) can be attributed to the Wholesale business and 52,047 MWh (52%) to the Audiological Care business. The Wholesale business accounts for a higher proportion of electricity consumption because of the air conditioning systems necessary in operation centers in China, Vietnam, and the US. On the other hand, the Audiological Care business accounts for a higher proportion of heating because of a stronger presence in Europe, where cold winters make heating more relevant. Compared to the previous year, total energy consumption reduced by 1%. This is due to the lower total distances covered by a more efficient car fleet. Despite the strong growth of the business, our energy consumption from heating and electricity remained stable. This development is also reflected in our energy intensity figure, which reduced by 24% from 39 MWh to 29.7 MWh per million CHF revenue compared to 2020.

Energy consumption

✔ PwC CH

MWh

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

 

2020

 

 

 

2019

 

 

Audiological Care

 

Wholesale

 

Audiological Care

 

Wholesale

 

Audiological Care

 

Wholesale

Total 1,2

 

52,047

 

47,988

 

51,216

 

50,169

 

55,505

 

57,984

Heating

 

24,299

 

7,015

 

22,507

 

7,166

 

22,458

 

9,050

Electricity

 

20,461

 

31,639

 

20,340

 

31,850

 

22,073

 

35,879

Vehicle fuels

 

7,288

 

9,334

 

8,369

 

11,153

 

10,974

 

13,054

1) Includes extrapolation, where only partial data is available.

2) 2019 + 2020 values restated due to methodological improvements. Impact on Scope 1+2 MWh around 6%. Main difference originates from the change to lower heating extrapolation values for Audiological Care Group companies.

Energy intensity

✔ PwC CH

MWh relative to million CHF revenue

 

 

 

 

 

 

 

 

2021

 

2020

 

2019

Total energy consumption (Scope 1 & 2)

 

100,035

 

101,385

 

113,489

Revenues

 

3,364

 

2,602

 

2,917

Energy intensity

 

29.7

 

39.0

 

38.9

1) 2019 + 2020 values restated due to methodological improvements. Impact on Scope 1+2 MWh around 6%. Energy intensity changed from 41.1 to 38.9 in 2019 and from 41.1 to 39.0 in 2020.

Sonova is committed to increase the share of renewable energy in its total energy consumption. In 2021, 54% came from renewable sources, surpassing our previously stated goal of a 20% renewable energy share by 2022. On-site photovoltaic panels have been installed at our operation center in Vietnam, and multiple operations have moved to sourcing bundled renewable electricity certificates, while the remaining renewable electricity was procured through unbundled renewable electricity certificates. In 2021, 53,678 MWh of energy came from renewable sources, representing an increase in the renewable energy share of total energy consumption from 19% to 54%, compared to 2020. A total of 945 MWh of renewable electricity was generated by on-site photovoltaic panels at our operation centers in China and Vietnam and our Wireless Competence Center in Switzerland (an increase of 66% over 2020). There are several projects planned for 2022/23 to build further photovoltaic panels across our locations.

Renewable energy

✔ PwC CH

MWh

 

 

 

 

 

 

 

 

2021

 

2020

 

2019

Total energy consumption

 

100,035

 

101,385

 

113,489

Non-renewable energy consumption

 

46,357

 

82,187 1

 

99,158 1

Renewable energy consumption

 

53,678

 

19,198

 

14,331

Share of renewable energy

 

54%

 

19%

 

13%

1) 2019 + 2020 values restated due to methodological improvements. Due to the lower consumption of non-renewable energy, our share of renewable electricity increased from 18% to 19% in 2020. 2019 remained unchanged at 13%.

Greenhouse gas (GHG) emissions

Sonova reached important milestones during 2021/22 in the decarbonization of our operations. We achieved, a year ahead of time, our target to reduce by 50% –compared with 2017 emissions –our greenhouse gas (GHG) emissions by revenue (these are Scope 1+2 and include Scope 3 air travel-related GHG emissions). In 2021, our GHG emissions intensity further declined to 4.3 metric tons of CO2 equivalents (t CO2e) per million CHF revenues. This results in a total reduction of GHG emissions intensity by 77% compared to 2017 levels. The main reason for this large drop is our switch to 100% renewable electricity sourcing across our operations. Our unavoidable emissions from Scope 1 and 2 were offset through a hydro project in China, a solar project in Vietnam and a forest protection project in the Brazilian Amazon. All projects are either verified by the Gold Standard or VCS (Certified Carbon Standard), two of the world’s most widely used verifying bodies for carbon credits.

In the 2021/22 financial year, Sonova measured its first full Scope 3 inventory for 2019, 2020, and 2021. As part of this extensive data collection endeavor, we also implemented methodological improvements, which led to the restatement of our 2019 and 2020 energy consumption and corresponding Scope 1 and 2 CO2e figures. Total Scope 1, 2, and 3 absolute GHG emissions for 2021 amounted to 159,436 t CO2e, an increase of 10% compared to 2020 (144,321 t CO2e). However, Sonova’s total GHG footprint is still 16% below its pre-COVID-19 levels in 2019, when it amounted to 189,022 t CO2e. Our Scope 1-3 GHG intensity was 55.5 t CO2e per million CHF revenue in 2020, but it decreased to 47.4 t CO2e per million CHF revenue in 2021. The majority of Sonovaʼs GHG emissions are Scope 3 (93% in 2021 vs. 83% in 2020).

GHG emissions – Scope 1 – 3

✔ PwC CH

t CO 2 e

 

 

 

 

 

 

 

 

2021

 

2020

 

2019

Total Scope 1 – 3 1

 

159,436

 

144,321

 

189,022

Scope 1 2

 

10,291

 

11,086

 

13,008

Scope 2 3

 

232 4

 

13,820

 

18,044

Scope 3 5

 

148,914

 

119,414

 

157,970

1) Includes extrapolation, where only partial data is available.

2) 2019 + 2020 values restated due to methodological improvements and inclusion of refrigerants. Impact on Scope 1 emissions around 13%.

3) 2019 + 2020 values restated due to methodological improvements. Impact on Scope 2 emissions <1%.

4) Sonova sourced 100% renewable electricity across its sites. Remaining Scope 2 emissions derive from district heating and electricity from EVs.

5) 2019 + 2020 values restated as total Scope 3 screening was conducted in 2021/22, including all applicable Scope 3 categories for 2019 – 2021. In previous years, only categories 4 and 9 (transportation and distribution), category 6 (business-related air travel) and category 7 (employee commuting) were measured and disclosed.

GHG emission intensity

✔ PwC CH

t CO 2 e relative to million CHF revenue

 

 

 

 

 

 

 

 

2021

 

2020

 

2019

Revenues

 

3,364

 

2,602

 

2,917

Total Scope 1 – 2 GHG emissions

 

10,523

 

24,906

 

31,052

Scope 1 – 2 GHG emission intensity

 

3.1

 

9.6

 

10.6

 

 

 

 

 

 

 

Total Scope 1 – 3 GHG emissions

 

159,436

 

144,321

 

189,022

Scope 1 – 3 GHG emission intensity

 

47.4

 

55.5

 

64.8

Scope 1 + 2 GHG emissions

Scope 1 emissions are direct CO2e emissions related to company vehicles, stationary combustion (e.g. heating), and fugitive emissions (e.g. from refrigerants), while Scope 2 emissions relate to indirect GHG emissions (e.g. from electricity consumption). Progress and actions related to the reduction of our Scope 1 and 2 emissions are reported monthly to the Group Vice President Operations.

In 2021, overall Scope 1 emissions decreased by 7% from 11,086 t CO2e to 10,291 t CO2e. The total CO2e footprint of Sonova’s owned and leased corporate car fleet decreased by 15% from 4,847 t CO2e in 2020 to 4,130 t CO2e in 2021. The driven distances remained slightly below 2020 levels. Part of our strategy to reduce emissions is to electrify our car fleet over the coming years. In 2021, there was an initiative across Sonova Group companies to move towards electric and hybrid vehicles, and we remain committed to further increase this share over the coming years. For the second year in a row, Sonova lowered the CO2e limit for new cars in its global car policy to 95 g CO2/km, making fuel efficiency a core decision criterion when acquiring new vehicles that are not fully electric. GHG emissions related to heating decreased by 3% from 6,111 t CO2e to 5,906 t CO2e. In the 2021/22 financial year, we included for the first time the Scope 1 GHG emissions that arise from refrigerants. In 2021, CO2e associated with refrigerants amounted to 255 t, in 2020 128 t and 2019 389 t.

In Scope 2, our market based GHG emissions declined by 98% from 2020, from 13,820 t CO2e to 232 t CO2e.The main reason for the absolute reduction in Scope 2 GHG emissions is the switch to 100% renewable electricity across our sites. Sonova increased the on-site generation of renewable electricity, switched towards renewable electricity contracts, and sourced the remaining electricity through unbundled Energy Attribute Certificates (EACs) to achieve a faster transition towards renewable energy. We also made Group-wide efforts to improve energy efficiency in our infrastructure and production processes. Sonova Group companies continued to develop local carbon footprint reduction measures to collectively decarbonize the organization. Examples include the installation of solar water heaters and the refurbishment of some PV panels in our operation center in China, the application of anti-heat paint in Vietnam, the installation of EV charging stations across several sites, and further improvements of building automation and optimizing electricity use for heating, ventilation, and air conditioning.

Sonova Group’s absolute carbon footprint of Scope 1 and 2 emissions for 2021 amounted to 10,523 t CO2e, down by 58% from the previous year’s emissions of 24,906 t CO2e.

Scope 1+2 GHG emissions

✔ PwC CH

t CO 2 e

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

 

2020

 

 

 

2019

 

 

Audiological Care

 

Wholesale

 

Audiological Care

 

Wholesale

 

Audiological Care

 

Wholesale

Total Scope 1+2 1

 

6,839

 

3,684

 

15,621

 

9,285

 

17,373

 

13,679

Scope 1 2

 

6,814

 

3,477

 

6,747

 

4,339

 

7,599

 

5,409

Scope 2 3

 

25

 

206

 

8,875

 

4,946

 

9,774

 

8,270

1) Includes extrapolation, where only partial data is available.

2) 2019 + 2020 values restated due to methodological improvements and inclusion of refrigerants. Impact on Scope 1 emissions around 13%.

3) 2019 + 2020 values restated due to methodological improvements. Impact on Scope 2 emissions <1%.

Scope 3 GHG emissions

The full Scope 3 screening showed that 12 of the 15 categories defined by the GHG Protocol are applicable to Sonova. Those not currently applicable are category 8 (upstream leased assets), category 13 (downstream leased assets), and category 14 (franchises). Sonova’s Scope 3 emissions were assessed at 119,414 t CO2e in 2020 and 148,914 t CO2e in 2021. The reason for the increase across our Scope 3 emissions was mainly driven by strong business growth: revenues increased by 29% compared to the previous year, but Scope 3 emissions increased by 25%.

In the next financial year, Sonova will continue to work on data collection and data quality improvements, and also assess the baseline emissions of the recently acquired Sennheiser Consumer Division and Alpaca Audiology, a network of around 220 audiological care clinics in the US. The sections below will provide a brief overview over the most material Scope 3 categories: Purchased goods and services, transportation & distribution, business travel, and employee commuting.

Scope 3 GHG emissions

✔ PwC CH

t CO 2 e

 

 

 

 

 

 

 

 

2021

 

2020

 

2019

Total Scope 3

 

148,914

 

119,414

 

157,970

Category 1: Purchased goods and services

 

71,327

 

57,234

 

66,623

Category 2: Capital goods 1

 

2,119

 

1,159

 

2,842

Category 3: Fuel- and energy-related activities (not included in Scope 1 + 2)

 

7,453

 

6,310

 

7,126

Categories 4 & 9: Upstream & downstream transportation and distribution 2

 

35,968

 

24,339

 

30,451

Category 5: Waste generated in operations

 

915

 

1,132

 

1,272

Category 6: Business travel 2

 

4,421

 

5,922

 

19,174

Category 7: Employee commuting 3

 

21,841

 

18,382

 

25,462

Category 10: Processing of sold products

 

236

 

200

 

207

Category 11: Use of sold products

 

2,769

 

3,164

 

3,165

Category 12: End-of-life of sold products

 

1,615

 

1,323

 

1,397

Category 15: Investments

 

250

 

250

 

250

1) Category 2 currently only includes GHG emissions related to IT equipment.

2) 2019 + 2020 values restated due to methodological improvements. Non-CO2 emissions related to aviation were taken into account with a radiative forcing multiplier of 1.9. In previously reported figures, only direct climate change effects were taken into account.

3) 2019 + 2020 values restated due to methodological improvements. Previous 16,296t CO2e in 2020 and 21,558t CO2e in 2019.

Category 1: Purchased goods and services

The largest source of Sonova’s GHG emissions derives from the procurement of direct and indirect materials and services. In 2021, 48% of Scope 3 emissions arose from supplier-related activity, mostly from procurement of electronic components, accessories, packaging, and batteries. Compared to 2020, category 1 emissions rose by 24%, below the revenue growth of 29%. Sonova is committed to actively engage with its key suppliers on GHG emission reductions and other environmental topics.

Category 4 & 9: Transportation and distribution

Air freight in product distribution is the main contributor to Sonova’s carbon footprint, accounting for around 99% of relevant CO2e emissions. In 2021, Sonova’s GHG emissions from transport and distribution amounted to 35,968 t CO2e, an increase of 47% vs. 2020. This includes the GHG emissions arising from transport from the supplier’s facilities to our operation centers, from our operation centers to our distribution centers, and from our distribution centers to retail stores (owned and third-party). The main reason for this increase is the rise in shipments. We made progress in 2020 towards switching to ground and ocean freight, but much had to be moved back to air due to current supply-chain dynamics and the low reliability of ocean shipping.

Sonova remains committed to reduce its GHG footprint from transportation and distribution and to switch to lower-polluting modes of transportation where this is feasible. We continue to work towards further reductions in packaging weight and volume, and are revisiting our global distribution network to encourage more regional sourcing to reduce transportation distances.

Category 6: Business travel

Accounting for 90% of business travel emissions, air travel is the predominant source of our business travel emissions. We are committed to reduce our GHG emissions from business-related travel by systematically using information and communications technology to substitute for air travel. Sonova’s stringent travel restrictions during the pandemic accelerated the uptake of video conferencing and other technologies. In 2021, the GHG emissions from business travel on a group-wide basis declined by another 25% compared to the previous year, down to 4,422 t CO2e (2020: 5,922 t CO2e).

Category 7: Employee commuting

Sonova’s GHG emissions from employee commuting increased compared to 2020 by 18% to 21,841 t CO2e, yet remained below our 2019 footprint of 25,462 t CO2e. The growth in emissions is mainly related to the increase in FTEs and the reduction in COVID-19 related restrictions (although many of our employees continue to work from home). Sonova is addressing future GHG emissions from commuting through its hybrid working guideline, which was launched in August 2021 and is currently being rolled out across the Group.

Local commuting options differ greatly from region to region, so localized solutions are essential for minimizing employee commuting related GHG emissions. In 2006, Sonova’s headquarters in Stäfa established an integral mobility program, which substantially increased the proportion of employees who commute using public transportation, bicycles, or walking. In 2019, Sonova France launched a similar mobility program, with elements including installation of charging stations for electric vehicles (EVs) and financial incentives for using public transport. Since then, many other Group companies, e.g. in Germany and China, are testing local solutions to promote environmentally friendly commuting. The most widely used options include allowances for using public transport and the installment of EV chargers. In our operation center in Suzhou, China, most employees commute with free-of-charge shuttle buses to get to their workplace. During the past financial year, all buses were exchanged with electric buses. Our annual global employee commuting survey also revealed a further uptake of electric vehicles across our workforce, which highlights the necessity to install further EV charging stations over the coming years.

Climate-related risks and opportunities

Sonova recognizes that climate-related risks and opportunities are relevant and need to be systematically analyzed in order to mitigate potential impacts and improve our climate resiliency; we publicly committed to do so in the previous financial year 2020/21, as part of our IntACT strategy, and provide a progress update in this section. We have also aligned more closely our reporting with the TCFD recommendations by the Task Force on Climate-related Financial Disclosures (TCFD) on climate-related disclosures and added tags for the specific disclosures (e.g. TCFD-GOV-a) as well as a TCFD content index to make it easier to find relevant information.

Governance

The ultimate oversight and responsibility for climate-related risks and opportunities lies with the Sonova Board of Directors. The Board of Directors receives a monthly written update by the CEO on the overall progress on selected ESG topics, including climate-related matters. A summary of the results of our first TCFD climate risk scenario analysis was presented to the Audit Committee of the Board of Directors in November 2021.

Our progress on climate-related actions and metrics is reviewed at least quarterly in ESG Council meetings by the CEO, CFO, GVP Operations, GVP Corporate HRM & Communication, General Counsel & Compliance Officer, as well as the Corporate Responsibility team. Progress on our Scope 1 + 2 GHG emissions is reported monthly to the GVP Operations.

Strategy & Risk Management

In the 2021/22 financial year, Sonova conducted for the first time a scenario analysis, in line with the TCFD recommendations. This focused on two scenarios: a “high-mitigation” below 2°C scenario (IEA SDS and IEA ETP), which is relevant to assess risks related to the transition to a low-carbon future, and a “business as usual” 4°C scenario (RCP 8.5), which helps to comprehend the physical risks associated with the intensification of widespread climate hazards. The analysis covered two different time-horizons, a medium-term (2030) and a long-term time horizon (2050).

The focus of this first pilot assessment was on seven countries where Sonova has a significant footprint through its operations or sales: Canada, China, Germany, Switzerland, United Kingdom, United States, and Vietnam. The assessment was based on a three-step approach: Firstly, we screened, mapped, and prioritized the relevant climate-related physical and transition risks and opportunities that could impact our operations and supply chains. Secondly, we conducted a hotspot analysis based on a thorough literature review on the latest climate-science and relevant climate policies, giving us insight on the expected change of underlying risks and opportunities over the different time frames. Finally, we performed a data-driven in-depth analysis with increased spatial resolution for selected risks at the facility level, as opposed to the hotspot analysis that focused the country level.

1. Screening and prioritization of risks and opportunities

Based on interviews with relevant internal stakeholders in the countries of focus, we made a benchmark assessment identifying a broad set of physical and transition risks that could potentially be relevant for Sonova. As a basis, we took the EU Taxonomy’s classification of climate-related hazards (2021). We then screened this broad list to pinpoint the key risks to which Sonova is potentially most vulnerable. Based on this screening, we shortlisted the potentially most impactful risks for the hotspot assessment.

Physical risks

The key physical hazards identified during the screening and prioritization phase potentially pose a threat both to Sonova’s facilities and supply chain and to elderly people, who, as the most numerous demographic group that experiences hearing loss, are our main consumers. The hazards prioritized in the scoping assessment included:

  • Heatwaves and extreme temperatures
  • Wildfires
  • Extreme cold
  • Heavy precipitation and flooding
  • Heavy winds and storms
  • Tropical cyclones
  • Sea level rise and coastal flooding

2. Hotspot analysis

To assess variations in climate patterns, and thus the risks and opportunities deriving from climate change, we conducted a hotspot analysis on a country-by-country basis, based on scientific literature. This projected conditions in the mid-term (2030) and long-term (2050), to better define potential local deviations from the baseline period. The baseline we used was 1976–2005, which is the period used in the Coupled Model Intercomparison Project Phase 5 (CMIP5). Where the supporting literature used different baselines or different future timeframes, we adjusted the baselines and/or the relative change accordingly. The identified risks were classified as follows:

  • Not relevant: deemed as not relevant during the prioritization phase
  • Low: below 10% change from baseline
  • Medium: 10–20% change from baseline
  • High: 20–30% change from baseline
  • Very high: above 30% change from baseline

Based on this assessment, we concluded that the physical hazards in the long-term (2050) represented a higher risk than in the mid-term (2030), compared to the baseline and across the countries concerned. The table below therefore highlights the long-term changes (2050 vs. baseline).

TCFD - Hotspot analysis of physical risks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country

 

Heatwaves and extreme temperatures

 

Wildfires

 

Extreme cold

 

Heavy precipitation & flooding

 

Heavy wind and storms

 

Tropical cyclones

 

Sea level rise and coastal flooding

Canada

 

Very high

 

Not relevant

 

Low

 

Not relevant

 

Not relevant

 

Not relevant

 

Not relevant

China

 

Not relevant

 

Not relevant

 

Not relevant

 

High

 

Low

 

Low

 

Not relevant

Germany

 

Very high

 

Not relevant

 

Low

 

Not relevant

 

Low

 

Not relevant

 

Not relevant

Switzerland

 

Very high

 

Not relevant

 

Low

 

Not relevant

 

Low

 

Not relevant

 

Not relevant

United Kingdom

 

Very high

 

Not relevant

 

Low

 

Not relevant

 

Low

 

Not relevant

 

Not relevant

United States

 

Very high

 

Very high

 

Low

 

Not relevant

 

High

 

Not relevant

 

Not relevant

Vietnam

 

Not relevant

 

Not relevant

 

Not relevant

 

Very high

 

Not relevant

 

Low

 

Very high

3. Deep-dive analysis

Based upon the results of the hotspot scenario analysis, the risks that were scored as very high were prioritized for a deep-dive assessment. This analysis was carried out to better understand how physical climate related risks may affect Sonova's operations and business in the long-term (2050) and focused on the top physical hazards under RCP 8.5 (as shown in the table above). For this assessment, we used various datasets derived from General Circulation Model (GCM) and runs conducted under the CMIP5.

TCFD - Deep-dive analysis of physical risks

 

 

 

 

 

Potential risk

 

Potential threat

 

Country

Heatwaves and extreme temperatures

 

The frequency and duration of heatwaves are projected to increased significantly, especially in the south and east of the US. Heatwaves may cause higher cooling costs and increase heat stress conditions for employees and customers. As elderly people are the most common demographic that experiences hearing loss and are also most affected by heat stress during heatwaves, they may not come to the stores, thereby affecting sales.

 

United States, United Kingdom, Germany, Canada

Wildfires

 

Average and maximum temperatures during wildfire season are projected to increase significantly, which leads to an increased risk in wildfires that may affect our production sites in California.

 

United States

Heavy precipitation and flooding

 

Heavy precipitation is expected to increase substantially in the Ho Chi Minh City region, which may cause supply chain and operational interruptions in our operation center due to flash and sustained flooding.

 

Vietnam

Sea-level rise and coastal flooding

 

As our operation center in Vietnam is located far inland, the projected sea-level rise and coastal flooding is expected to pose no substantial risk.

 

Vietnam

Sonova is committed to mitigate these identified physical risks. The continued execution of Sonova’s omni channel strategy, which includes increased online sales presence, should help us to mitigate the identified climate risks. Physical climate risks are also being taken into account when opening new facilities as well as in the design of Sonova’s supply chain.

Transition risks

The objective of transition risk assessment is to identify the risks and opportunities that may arise for Sonova in five main areas: policy, litigation, technology, market, and reputation – all in the context of the transition to a low-carbon economy. During the screening and prioritization phase we identified four key transition risks and one opportunity, as shown in the table below:

Transition risks & opportunities

Risks

 

Opportunity

Carbon pricing schemes

 

Energy savings due to net zero retrofits

Net zero retrofit requirements

 

 

Scope 3 reduction

 

 

Increase in airfares

 

 

We determined the likelihood of these risks and opportunities materializing and affecting Sonova in the short-term (next five years), medium-term (2030) and long-term (2050) based on scenario analysis (IEA SDS and IEA ETP), national scenarios, policies, strategies, and long-term projections that were reviewed for each of the assessed countries. The risks and opportunities were assigned a qualitative rating based on Sonova’s footprint within the respective jurisdiction and the likelihood that the identified topics would materialize. The matrix below shows the highest risk that was identified across all timeframes (2025, 2030, and 2050) and scenarios.

TCFD - Hotspot analysis of transition risks

 

 

 

 

 

 

 

 

 

 

 

Country

 

Carbon pricing schemes

 

Net zero retrofit requirements

 

Scope 3 reduction

 

Increases in airfares

 

Energy savings due to net zero retrofits

Canada

 

Not relevant

 

Low

 

Not relevant

 

Not relevant

 

Low

China

 

Not relevant

 

Low

 

High

 

Not relevant

 

Medium

Germany

 

Low

 

Low

 

Low

 

High

 

Low

Switzerland

 

Low

 

Low

 

Not relevant

 

High

 

High

United Kingdom

 

Low

 

Low

 

Not relevant

 

High

 

Low

United States

 

Not relevant

 

Low

 

Not relevant

 

Not relevant

 

High

Vietnam

 

Not relevant

 

Low

 

Not relevant

 

Not relevant

 

Low

The results show a low risk in most cases, except for 1) challenges that Sonova may face in reducing Scope 3 emissions, especially for suppliers in China, due to relatively underdeveloped regulatory frameworks failing to stimulate emissions reductions at the desired rate; and 2) potential increases in Sonova’s operating costs from stricter aviation sector policies resulting in higher air-transportation fares. The assessment also identified potential opportunities, particularly from incentives and government support to reduce emissions in the building sector.

To mitigate some of these transition risks, Sonova is committed to switch as much of its air freight as possible to less polluting modes, such as road and sea. Due to challenging supply-chain conditions in 2021/22, however, less volume could be switched to sea-freight than we had hoped.

Next Steps:

In the next financial year, Sonova will continue to align closely with TCFD recommendations and increase the number of countries assessed, so as to identify climate-related risks and opportunities in other geographies where Sonova is represented. We also plan to start quantifying the financial impacts from these climate-related risks and opportunities.

Eco-friendly products

Sonova is committed to minimizing the impact on the environment and human health of its products and packaging throughout their entire life cycle, and to fostering the transition toward a more circular economy. Our environmental actions cover different life-cycle stages, ranging from product materials, to procurement and manufacturing, packaging and distribution, consumer use, and end-of-life.

Product materials

Sonova aims to reduce the use of hazardous substances, avoid other environmental risks, minimize consumption of resources, and design for recycling and easy end-of-life treatment. As a medical device manufacturer, Sonova takes a proactive approach to evaluating materials in its products and components to assess environmental, health, or safety risks. Sonova may restrict substances because of customer or legal requirements, or because the company believes it is appropriate, based on a precautionary approach. Evaluating alternative materials is a continuous process, relevant to all stages of production.

Sonova complies with the EU directive on Restriction of Hazardous Substances (RoHS 2015/863/EU), which governs the use of heavy metals and halogenated compounds in electrical and electronic equipment, and with the EU’s regulation on the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH EC 1907/2006) for the safe manufacture and use of chemical substances throughout their life cycle. Sonova’s suppliers are also required to prove their compliance with the RoHS directive and the REACH regulation in their respective processes and supply chains.

In accordance with REACH regulation, Sonova continuously updates the list of substances of very high concern (SVHC) that may be present in its products above the regulatory threshold level of 0.1% by weight of the article. This list is made publicly available on the Phonak website. By the end of the 2021/22 financial year, there were three SVHC substances requiring communication in accordance with the REACH regulation: 1,3-propanesultone, lead titanium trioxide, and lead, down from four SVHC substances that were present in our products the previous year. It is our target to have zero SVHC present in Sonova products above the 0.1% threshold level by 2022. For example, in 2021/22, Sonova launched a project to reduce the amount of SVHCs, e.g. by pursuing lead-free (<0.1% Pb) base materials for charging contacts.

Other substances classified as hazardous – but excluded from the RoHS directive – include solder paste and wire, paint, organic solvents, oil emulsions, mineral oil, and water-based cleaning solution. Employees who work with chemicals and hazardous substances, or come into contact with them, are trained on an annual basis in their safe handling.

Procurement and manufacturing

We insist on environmentally friendly business practices throughout our supply chain. The Sonova Group Supplier Principles recommend that suppliers use the international ISO 14001 standard as the starting point and basis for their work. In the 2020/21 financial year, we had achieved our 2022 goal – to increase the share of our purchase volume from suppliers with certified environmental management systems (EMS) to 75% - ahead of schedule. During the next financial year, Sonova will increase its supplier engagement to accelerate the decarbonization of our supply chain.

Packaging and distribution

We strive to reduce the amount of waste we generate, and the carbon footprint of our product packaging and transportation. As part of the introduction of IntACT in the previous 2020/21 financial year, we raised our 2023 targets not only to increase our operational waste recycling rate, but to reduce our product and transportation packaging waste by 20% in terms of weight, compared to our 2019 baseline. While progress has been made both on our product and transport packaging, Sonova is currently not on track to achieve the 2023 ambition due to strong sales growth of 29% in the 2021/22 financial year. In 2021, the total weight of transport and product packaging stood at 1,310 metric tons, up by 28% vs. previous year and 10% vs. the base year 2019.

Packaging

metric tons

 

 

 

 

 

 

 

 

2021

 

2020

 

2019

Packaging weight 1

 

1,310

 

1,023

 

1,187

1) Includes transport packaging and hearing instruments product packaging.

During our annual Kaizen week, which is sponsored by the Management Board, one pilot project was dedicated to develop a new, more environmentally friendly packaging. The cross-functional project team, which also included external design and environmental experts, came up with an improved charger packaging solution that is 28% lighter than the previous version and consists of recycled materials. Product carbon footprint calculations reveal that it achieves a 37% lower CO2e footprint than its predecessor. There are currently still some regulatory issues pending before the new packaging can be introduced to the market.

During 2021/22, Sonova also published a new Sustainable Product Packaging Policy, which formalizes and specifies our commitment to reduce negative impacts of packaging on the planet and people – throughout its lifecycle. The policy focuses on the packaging’s use of sustainable materials, the minimization of weight, volume, and hazardous materials, and its suitability for reuse and recyclability.

An internal comparative life cycle analysis revealed that our SLIM packaging reduces the packaging size, weight, and correlated GHG footprint by almost 40% per shipped pair compared to the previous packaging concept. The largest climate change impact from our packaging arises in the transportation phase. Since SLIM packaging is lighter, the impact from transport is significantly lower. Another example of our commitment to cut waste is the packaging size reduction of our Advanced Bionics Naída sound processor: we reduced its weight by 63% and the relevant GHG emissions by 145 t CO2e.

Consumer use

Since 2016, Sonova’s Phonak, Unitron, and Hansaton brands have continuously expanded their portfolios of hearing aids with a built-in lithium-ion rechargeable battery. Compared to 2020, Sonova increased its sales of rechargeable behind-the-ear (BTE) and receiver-in-canal (RIC) hearing instruments by 30% from 42% to 55%. Our increasing focus on rechargeable hearing solutions helps us to reduce the use of disposable batteries. Advanced Bionics also offers rechargeable battery options for cochlear implant sound processors. We also provide a broad range of repair and refurbishment services to lengthen the life cycle of our products and their components.

Product end-of-life

Sonova complies with the EU directive on Waste Electrical and Electronic Equipment (WEEE), which requires such equipment to be returned to the manufacturer for recycling or environmentally friendly disposal.

Selected Sonova Group companies in the Audiological Care business offer various battery collection programs, in which customers can bring their used hearing aid batteries back to the store or take home a box, collect their batteries, and bring them back to the store for recycling. The batteries collected are forwarded and disposed of through officially authorized disposal agents. In 2021, more than two metric tons of batteries were collected at different stores worldwide.

Waste

Sonova is committed to avoiding or reducing operational waste wherever possible, collecting recyclables separately, and disposing of hazardous waste in environmentally compatible ways. Our five-year target from 2017 to 2022 is to increase the recycling rate to 60% through Group-wide efforts to reduce operational waste, improve waste separation, and foster recycling.

In 2021, the recycling rate remained stable at 53% across our manufacturing sites and larger wholesale Group companies. We reduced the amount of total waste by 12% to 1,779 metric tons compared to the previous year, due to many smaller local initiatives, such as printing less, moving away from heavy wooden pallets, and improved data quality. While non-hazardous waste (both waste to energy and landfill) decreased by 14% from 894 t to 771 t, recycling waste reduced by 11% from 1,063 t to 942 t compared to previous year.

In the spirit of continuous improvement, we increased the scope of operational waste across all sites, including audiological care shops. We estimate non-hazardous waste sent to disposal in 2021 to have been 1,402 metric tons, hazardous-waste 71 metric tons, and recycled waste 1,315 metric tons.

Sonova complies with legal requirements to transport and dispose of hazardous waste solely through officially authorized disposal agents. The main categories of hazardous waste substances are solvents, oil emulsions, paints, adhesives, soldering paste, filters, petroleum, and washing fluids. During the annual data collection period, we corrected for inconsistencies in hazardous waste data collection in one manufacturing site. We therefore restated our hazardous waste figures for 2019 from 39 t to 62 t (+61%), and for 2020 from 37 t to 56 t (+54%). In 2021, the amount of hazardous waste increased by 10 metric tons compared to 2020, which is in line with the increase in production volume.

Waste - limited scope1

metric tons

 

 

 

 

 

 

 

 

2021

 

2020

 

2019

Total waste

 

1,779

 

2,013

 

2,203

Non-hazardous waste

 

771

 

894

 

995

Hazardous waste 2

 

66

 

56

 

62

Recycling waste

 

942

 

1,063

 

1,146

Recycling rate

 

53%

 

53%

 

53%

1) Limited scope includes HQ, manufacturing sites, distribution centers as well as wholesale Group companies (GCs) with 50+ FTEs, excl. wholesale GCs with <50 FTEs and audiological care GCs. Covered FTEs in 2019 + 2020: 51%, 2021: 52%.

2) 2019 + 2020 values restated due to data quality improvements. Hazardous waste restated from 37t to 56t in 2020, 39t to 62t in 2019.

Waste - full scope

✔ PwC CH

metric tons

 

 

 

 

2021

Total waste

 

2,788

Non-hazardous waste

 

1,402

Hazardous waste

 

71

Recycling waste

 

1,315

Recycling rate

 

47%

Water

Sonova uses water provided by utilities primarily for sanitary services and kitchen and garden areas. Our manufacturing processes do not require significant amounts of water. Therefore, we mainly focus on conserving water in our office buildings, e.g. with low-volume water equipment in restrooms.

In the 2020/21 financial year, Sonova conducted a basic physical water risk analysis on the geographic water-catchment area (basin level) for its major production and manufacturing sites, using the WWF’s Water Risk Filter tool. The analysis revealed that most sites are not located in water stressed regions.

The sources of all water withdrawn are municipal water supplies or other public or private water utilities. Compared to 2020, water consumption increased by 11% from 113,429 m3 to 126,270 m3 across our manufacturing sites and larger wholesale Group companies. This increase is mainly related to the relaxation of COVID-19 containment measures from 2020 to 2021. Compared to 2017, when water consumption per employee was 18.2 m3, our target for 2022 was to reduce our water consumption by 5% to 17.3 m3. Our water consumption per employee has currently decreased by 13% compared to the 2017 baseline. We are committed to continue driving actions that help us to reduce our freshwater withdrawal.

Water withdrawal - limited scope1

m 3

 

 

 

 

 

 

 

 

2021

 

2020 2

 

2019

Total municipal water supply

 

126,270

 

113,429

 

139,707

Municipal water supply per full-time employee (FTE)

 

15.9

 

15.3

 

18.1

1) Limited scope includes headquarters, manufacturing sites, distribution centers as well as Wholesale Group companies (GCs) with >50 FTEs, excluding Wholesale GCs with <50 FTEs and Audiological Care GCs. Covered FTEs in 2019 + 2020: 51%, 2021: 52%.

2) 2020 value restated due to data quality improvements. Water withdrawal increased from 112,589 m3 to 113,429 m3. Water withdrawal per FTE increased therefore to 15.1 to 15.3m3 per FTE.

In the 2021/22 financial year, Sonova also increased its water data collection scope to all sites, including smaller Wholesale and Audiological Care Group companies. Sonova’s total water withdrawal was 199,951 m3 in 2021.

Water withdrawal - full scope

✔ PwC CH

m 3

 

 

 

 

2021

Total municipal water supply

 

199,951

Municipal water supply per full-time employee (FTE)

 

13.1

Sonova returns water to the sewage system without contamination. We have not experienced any spills from operating processes or other instances of water contamination.

Biodiversity

Sonova’s global activities, products, and services have a limited direct or indirect impact on biological diversity and natural ecosystems, such as loss of biodiversity, destruction of natural habitats, and deforestation.

Environmental reporting and system boundaries

Sonova’s environmental data monitoring and reporting includes energy consumption, CO2e footprint, materials, waste disposal, and water consumption, and is based on the calendar year. The company reports and discusses environmental performance to the limits of the available data. Actual data is collected whenever possible, and estimated if data collection is not feasible given the decentralized organizational structure of these businesses and their small, often rented, facilities.

The tables in the section ‘Protecting the planet’ show environmental data from Sonova Group companies that operate as headquarters, manufacturing sites, or wholesale distributors, as well as Group companies with audiological care activities. The Consumer Hearing Business acquired in the 2021/22 financial year is not included in this year’s ESG Report. CO2e footprint, energy consumption, waste, and water data are provided for all entities in the 2021 environmental data reporting.

Sonova differentiates between direct GHG emissions (Scope 1) deriving from the combustion of fossil fuels, indirect GHG emissions (Scope 2) from sources such as using electricity, and indirect emissions (Scope 3) that arise from our value chain. 12 out of the 15 Scope 3 categories defined by the GHG Protocol are currently applicable to Sonova.

Sonova monitors Scope 1 + 2 GHG emissions arising from its consumption of heating oil, natural gas, biogas, vehicle fuels such as diesel and gasoline, refrigerants, as well as district heating and electricity. N2O and CH4 emissions from biogenic sources, e.g. biogas, are included in Scope 1, while the related CO2 emissions are excluded as per the GHG Protocol. Outside-of-scope CO2 emissions from biogenic sources amounted to 367 t CO2 in 2021.

The company measures its electricity-related footprint using country-specific grid emission factors. Scope 2 emissions were calculated using the ‘market-based’ approach in accordance with the GHG Protocol Scope 2 Guidance. When reported according to the ‘location-basedʼ approach, the Scope 2 emissions were 17,712 t CO2e. Sonova purchased 35,744 MWh as unbundled Electricity Attribute Certificates (EACs), which were accounted for under the market-based approach for Scope 2.

Scope 3 categories 4 & 9 (Transportation and distribution) as well as 6 (Business travel) include non-CO2-related emissions deriving from aviation. A radiative forcing multiplier of 1.9 is currently applied as recommended by the UK Department for Business, Energy & Industrial Strategy.

The measurement methodology and reporting format for the carbon footprint are based on the standards and guidance of the Greenhouse Gas (GHG) Protocol. Sonova follows the financial control consolidation approach for setting organizational boundaries. Global warming potentials (GWP) from the IPCC’s fourth assessment report (AR4) are applied to calculate CO2 equivalents. Relevant gases included are CO2, CH4 and N2O. Key emission factor sources for calculating GHG emissions can be found in the table below:

Emission factor sources for environmental reporting

 

 

 

Scope & Category

 

Main emission factor sources

Scope 1

 

- BEIS Department for Business, Energy & Industrial Strategy

Scope 2

 

- Association of Issuing Bodies (European Residual Mix) - IEA International Energy Agency (Emissions Factors) - EPA Environmental Protection Agency (eGRID) - Environment and Climate Change Canada (Electricity Can Prov Terr)

Category 1: Purchased goods and services

 

- EcoInvent (version 3.7) - CEDA Comprehensive Environmental Data Archive (version 5.05) - BEIS Department for Business, Energy & Industrial Strategy - Quantis World Food LCA Database (version 3.5) - IPC (2017 cycle Price level index (World = 100))

Category 2: Capital goods

 

- Dell Carbon Footprints

Category 3: Fuel- and energy-related activities (not included in Scope 1 + 2)

 

- BEIS Department for Business, Energy & Industrial Strategy - IEA International Energy Agency (Emissions Factors)

Categories 4 & 9: Transportation and distribution

 

- BEIS Department for Business, Energy & Industrial Strategy

Category 5: Waste generated in operations

 

- BEIS Department for Business, Energy & Industrial Strategy - EcoInvent (version 3.7)

Category 6: Business travel

 

- BEIS Department for Business, Energy & Industrial Strategy

Category 7: Employee commuting

 

- BEIS Department for Business, Energy & Industrial Strategy - IEA International Energy Agency (Energy Efficiency Indicators) - Anthesis, Energy Consumption & GHG Emissions for Remote Workers (White Paper Feb. 21)

Category 10: Processing of sold products

 

- IEA International Energy Agency

Category 11: Use of sold products

 

- IEA International Energy Agency

Category 12: End-of-life of sold products

 

- BEIS Department for Business, Energy & Industrial Strategy

Category 15: Investments

 

- OECD Organisation for Economic Co-operation and Development