Climate risks and opportunities

Climate-related emerging regulation might have a significant impact on our operations. Regulation may impact our profitability in many forms. Changes in energy prices (such as electricity, heat, natural gas or liquefied petroleum gas) have an effect on our factories' operational costs. Konecranes is not currently under any emission trading scheme globally, but we are following developments as well as the price of carbon as the regulation on this might change. 

Konecranes has a systematic way to follow up emerging regulations. Konecranes participates in relevant industry organizations, following national, EU-level and international regulation/agreements. Relevant aspects to follow are new regulations on emission trading systems and emission taxes, on energy efficiency, substance management, packaging and circular economy. Environmental legislation and regulation regarding climate action are followed on the corporate level when these requirements have global business relevance or impact reporting on a global level. On a local level, reviewing environmental legislation and local environmental risks is an important part of the ISO 14001 Environmental management system. Other business functions and product development follow product specific legislation requirements on e.g. motors.

Technology plays a crucial part in our business, and we closely follow technological developments in sectors material to us and our customers. Market risks can relate to increased production costs due to changing input prices (energy, raw-materials etc.) and output requirements (waste treatment). Technological development pressure in carbon-intensive industries might also increase costs and the availability of technology or key components. Wide electrification trend might cause availability risks in batteries. 

We need to understand in what ways different technologies are developing and ensure that our low-carbon solutions and selected technologies are attractive to our clients. The significant risk for us related to technology lies in the selection of technologies used in our portfolio. Technological development pressure in carbon-intensive industries might also increase costs and the availability of technology or key components. If technologies, related to i.e. emission reduction or energy saving are not properly assessed, it might resume in not becoming popular amongst customers (due to i.e. regulation changes, material scarcity and cost increase or supply chain issues). To mitigate technology related risks Konecranes ensures that our low-carbon solutions and selected technologies are effective and attractive to our clients. To understand the changes in attitudes and requirements in different regions, we closely monitor shifts in the global megatrends, "quiet signals" and customer feedback on climate issues by engaging closely with our customers via e.g. our Voice of Customer surveys. We use this feedback in our strategic planning and discuss these demands internally with our R&D, sales, marketing, management and engineering teams and externally with other stakeholder groups.

Climate-related issues are not seen as major reputational risks as we have clear and ambitious climate targets for energy and emission efficiency, worldwide environmental management systems in place, global guidelines about requirements for suppliers, rigorous internal HSE practices, and we systematically monitor and report our performance. In addition, our product-related environmental claims are based on third party-assessed facts. 

Biggest climate related risks are physical risk related to value chain and market risks related to cost impacts. Costs are impacting the direct material purchasing (i.e. possible carbon taxes) and the potential physical risks are mostly related to transportation. We take advantage of findings from climate risk scenario analysis in building our strategic programmes and supplier evaluation. Having a continuance plan for production changes due to e.g. extreme weather conditions lowers the interruption risk for production. Currently, we demand adequate environmental management from our suppliers, having 56% (in 2021) of our total procurement spend sign our Supplier Code of Conduct.

An increase in extreme weather conditions such as cyclones, hurricanes, hailstorms and lightning could especially affect our crane installations and project sites. Heavy rainfall, floods and the rise of sea levels would put some of our production sites at risk. Extreme weather conditions can also have a potential impact on the shipment of our products or spare parts. Heatwaves significantly lower labor productivity and safety, and we have mitigation practices in place. Physical risks for our production sites are assessed together with an insurance company and actions are taken accordingly. 

Increasing temperatures might have a health and safety risks for our service operatives working in hot areas. Rising sea levels could potentially affect future Port operations by hindering the service or installation of port cranes, and rising sea levels might also endanger some of our production or subcontracted production sites. Physical risks of our production sites are assessed as part of our natural hazard risk evaluations done together with an insurance company and actions are taken accordingly.

We have a unique position to help our customers restructure to a low carbon future by providing solutions which intensify decarbonization and advance electrification. Our customers are facing more stringent environmental regulation that demand carbon emission reductions and are therefore seeking ways to cut their dependency on fossil fuel. The growing demand for low-emission products present a great opportunity for us - especially in traditional diesel engine powered product segments globally. 

We identify and respond to climate-related risks and opportunities by educating customers on the climate impact of their choices. When looking at our Scope 3 data, the use of sold products is the largest source of emissions. This is why we want to engage with our customers in emission reductions and provide them fact-based information on climate change mitigation, which they can use in their decision making. Providing information about our products' environmental impact and the technical specification for actual carbon reductions gives our customers the opportunity to better understand and minimize their climate impact. We have a wide offering of eco-efficient products and solutions for customers to choose from. Providing information about our products' environmental impact and carbon reductions possibilities gives our customers the opportunity to reduce their climate impact. 

We have set Science Based Emission Targets for our own operations as well as for the value chain that are in line with the with the goal to limit global warming to 1.5°C. 98% of our emissions originate from value chain. Most of the emissions are generated from emission categories purchased goods and services and use of sold products. This commitment guides us to making more strategic decisions related to increasing the share of eco-optimized portfolio including electrification and investigate new technologies that helps our customer to transition to a low carbon future. We are especially focusing on reducing CO2 emissions from steel sourcing, electrifying our product offering and cutting the dependency on fossil fuels. 

Development and introduction of novel technologies, aiming to reduce CO2 emissions and to increase energy efficiency is a major opportunity for Konecranes. Climate related capital and operational expenditure include, for example, facility improvements, sourcing of green activities and research and development projects. These activities support the transition towards a low carbon economy and achieving the Science Based Targets set for own operations and for the value chain.

Signals from markets, legislation development, voluntary agreements made by industries, customer feedback and requests for quotations all indicate that the demand for low emission products and services will continue to increase. One example of a significant local driver is the state of California that offers investment subsidies for non-road product modernizations, turning traditional diesel driven equipment into hybrids or full electric to reduce the local emissions. As we already have energy efficient products in all product segments available and focus on continuous product development and technological improvements, growing demand for low-emission products present a great opportunity for us - especially in traditional diesel engine powered product segments such as Ports. 

From optimizing fuel efficiency in diesel drives, to hybridization and fully electrified fleets, we enable our customers to choose low carbon power options and other energy-saving solutions like regenerative breaking. We also offer several retrofit and modernization solutions for customers to update their technology up to current standards and to enable them to reduce emissions and increase fuel efficiency. For example, choosing a full electric option for terminal operation instead of a traditional diesel equipment fleet, for example RTG´s, can decrease emissions up to 60-80% during products’ use phase. For most of our product families we already have third party assessed Environmental Product Declarations available.
 

Konecranes service business advances circular economy by focusing on extending product lifecycles. By maintaining the equipment, we can extend its lifetime and create significant raw-material and emission savings. The need for major equipment overhauls will very likely increase as it's a cost-efficient way to upgrade the current fleet. Our service business supports the mitigation of climate impacts with efficient maintenance concept, spare part availability and re-engineering obsolete spare parts, utilizing data from the fleet and by taking part in the product development. 

By providing predictive maintenance services we help customers gain maximum lifecycle value from their products. Connected devices and online platforms provide data on the state of components in real time, which leads to a smarter use of resources and extends the lifetime of a product. With predictive maintenance unplanned service hours can be avoided and equipment performance can be maintained at the highest possible level, extending a product’s lifecycle. 

Konecranes offers several retrofit solutions for customers to reduce emissions, increase fuel efficiency and update technology to current standards. Modernizing an old crane instead of purchasing a new one, saves hundreds of tonnes of steel, resulting in remarkable emission savings. Modernizations and retrofits also enhance the energy efficiency and performance of the equipment.

We live in a world of smart equipment where lifting and material flow equipment are no different. With digital solutions like automation, we can improve the productivity and safety while minimizing energy consumption and emissions. We offer completely automated port and terminal systems as well as manual equipment with a built-in growth path to automation. We also offer for example remote monitoring where digital tools bring crane information online, so it is easily accessible anytime and anywhere. With TRUCONNECT, which uses remote sensing technology and big data, crane usage information can be collected real-time. Analyzing and identifying anomalies, patterns and trends in TRUCONNECT data helps our customer make informed maintenance decisions and prioritize actions. This information can be used in optimizing material flows like to supporting customers to replace components when necessary not when the calendar dictates.

Konecranes actively follows its energy and emission performance and has set targets for reducing energy consumption and emissions in its own operations. Having energy and emission targets for own operation encourage the company to continuously seek new ways to reduce its environmental footprint. Konecranes strategic decision is to power all its manufacturing sites with renewable electricity and systematically investigating the potential related to electric vehicles. We also continue to reduce our own emissions from production by investing in energy efficiency of facilities, LED lights, improved heating and insulation, more energy-efficient machinery and more fuel-efficient vehicles. This will have short- and medium-term impact to for example cost allocation by securing energy expenses are minimized.