Description of the Processes to Identify and Assess Material Impacts, Risks, and Opportunities

We have relied on materiality assessments as a strategic tool to orient our sustainability strategy and our reporting since 2011. In 2024, we revised our materiality assessment process extensively in line with new requirements under the ESRS, and performed a double materiality assessment pursuant to ESRS provisions. We also consolidated the assessment at Group level for the tesa and Consumer Business Segments.

The first step of the assessment involves defining potential and actual positive and negative impacts, as well as financial risks and opportunities. To do this, we identified business activities along our entire value chain at the level of the sub-topics specified in the ESRS, in which impacts, risks, and opportunities could arise. This allocation of the value chain provided an overview of potential interdependencies between the environmental and social impacts and the associated risks and opportunities within the materiality assessment. As a player in the cosmetics and FMCG industry, our focus is on resource use, packaging management and supply chain conditions. For example, we analyze how the extraction and processing of key raw materials such as palm oil or water produce environmental risks such as deforestation or water scarcity, while addressing social challenges such as fair working conditions in the supply chain. These interactions are analyzed not only for potential risks, but also for opportunities such as innovative packaging solutions or sustainable raw material alternatives. The aim is to ensure that our sustainability strategy is not developed in isolation, but as a dynamic response to complex interdependencies.

Our data basis was drawn from internal sources such as topic-specific risk analyses, and external data sources that deal with industry-specific risks.

We considered both our own operations and the upstream and downstream value chain in identifying and assessing the impacts of our company on people and the environment. The focus was on our main business activities, product groups, business relationships, and key raw materials supply chains in which multiple negative and positive impacts, opportunities, and risks are likely. Individual sites and assets were not reviewed and affected communities were not consulted with a view to impacts, opportunities, and risks in the areas of pollution, water, resource use and circular economy. In some cases, individual impacts were assessed separately because of the different business models of the Consumer and tesa Business Segments.

In the next step, these impacts, risks, and opportunities were assessed and prioritized in several internal workshops involving representatives from all affected departments. In planning the workshops, we made sure that specialist representatives were in attendance, who were in regular dialog with relevant external stakeholders and whose perspectives could therefore be directly included in the discussions. No external experts were involved.

The assessment of impacts, risks, and opportunities was based on the methodology and thresholds set out in the implementation guidance of the “European Financial Reporting Advisory Group” (EFRAG). Negative impacts were assessed in terms of scale, scope and irremediable character, and potential impacts in terms of likelihood. Positive impacts were not assessed in terms of irremediable character. Having assessed the positive and negative impacts, we classified these according to the scales and materiality thresholds determined by the EFRAG.

In our financial materiality assessment, the likelihood of occurrence and the potential scale of the financial effect were considered. We applied the scales and thresholds used in the Group-wide risk management system. This was also a net risk assessment, in line with the Group-wide risk management system. Such methodological alignment is intended to ensure that the knowledge obtained from the materiality assessment can be integrated into the company’s general risk management and thus also in the associated management processes. Sustainability risks are generally regarded as equally as important as other risk types in the Group-wide risk management system. Where sustainability risks are categorized as strategic risks, they are given special consideration (see “Risks and Opportunities Report”).

Where an impact, opportunity, or risk exceeded the materiality threshold, the associated topic was classed as material. The final results were then validated by the relevant sustainability bodies from the two business segments: the Sustainability Council (Consumer Business Segment) and the Executive Committee (tesa Business Segment). The Executive Board and Supervisory Board (Audit Committee) of Beiersdorf AG were also informed and discussed the possible strategic implications of the results.

Based on the impacts, risks and opportunities identified as material, Beiersdorf selected the disclosures to be reported and assigned material data points to the IROs. Data points that are voluntarily reported or subject to phase-in options were eliminated. Where Beiersdorf identified individual data points or data elements in the remaining data points that were not considered material due to company-specific circumstances, these were not included in the reporting. An overview of all reported disclosure requirements can be found in “Annex A.”

Monitoring identified impacts and risks is a key part of our sustainability management. Developments and progress within the framework of our sustainability strategy are measured against clearly defined KPIs and targets, allowing any necessary adjustments to be made at an early stage. The results are presented to the relevant committees so that the identified risks and impacts can be strategically addressed. Regular reviews of the materiality assessment ensure that our actions remain relevant. The materiality assessment is scheduled to be reviewed during reporting year 2025 and updated as necessary.

Assessment of Climate-related Impacts, Risks, and Opportunities

To identify climate-related impacts in the materiality assessment, we considered in particular our Scope 1 – 3 emissions, in order to take account of the impacts from both our own operations and the upstream and downstream value chain. We perform regular analyses to assess physical and transition climate risks and opportunities – most recently in 2023 – in line with the requirements of the “Task Force on Climate-related Financial Disclosures” (TCFD). These results were also included in the materiality assessment. The transition risks and opportunities were assessed based on the “Net Zero Emissions by 2050” (NZE) scenario of the “International Energy Agency” (IEA). This involved assessing the extent to which certain business activities and assets are directly or indirectly affected by regulatory, technological, reputational or market risks, the scale and likelihood of the impacts, and which remediation actions Beiersdorf takes.

We also performed an additional site-specific assessment of physical risks for all production sites in 2024. This was based on currently available scientific findings and relevant methods in line with the latest report by the “Intergovernmental Panel on Climate Change” and recognized scientific publications. The assessment covered both chronic and acute natural hazards, aiming to identifying all material risks to production sites under current and future climate conditions. We analyzed the hazards based on an ensemble of 20 climate models, taking into account emission scenarios SSP1-2.6, SSP2-4.5 and SSP5-8.5 for four periods (2000, 2030, 2050, 2085).

The three emission scenarios covered the entire spectrum of currently conceivable developments:

• SSP1-2.6: This scenario assumes a slight increase in emissions from 2020 with an increase in temperature of below 2 °C against pre-industrial levels. This requires extensive climate change mitigation actions.
• SSP2-4.5: This scenario represents a medium emission pathway, with a balance between climate change mitigation actions and economic performance. There is a moderate increase in GHG emissions as fossil fuels continue to be used, resulting in a greater need for adaptation strategies, especially in vulnerable regions.
• SSP5-8.5: This scenario assumes a sharp rise in emissions. Increased use of fossil fuels and an energy intensive lifestyle result in a temperature rise of around 5 °C by the end of the century. Minimal climate change mitigation actions are implemented. Climate adaptation challenges require international coordination.

A site and building-based risk assessment was carried out for each climate-related hazard. The risk comprises the threat at the site due to natural hazards (hazard analysis) and the associated damage potential for the property assessed (vulnerability).

Assessment of Impacts, Risks, and Opportunities related to Biodiversity and Ecosystems

We applied a two-step process to assess actual and potential impacts on biodiversity and ecosystems, both from our own operations and along the upstream and downstream value chain. First, we performed a traceability study on our palm oil supply chain. It then assessed biodiversity risks in the specific regions of our own sites and the oil mills in the upstream supply chain using such tools as the WWF’s “Biodiversity Risk Filter” (BRF) and “Water Risk Filter” (WRF). Moreover, as a founding member of the “Action for Sustainable Derivatives” (ASD), we have been conducting an annual transparency analysis of our palm oil supply chain since 2019 to identify hotspots, disclose upstream supply chains, and support targeted local projects (see chapter “ESRS E4 – Biodiversity and Ecosystems”).

The WWF’s BRF covers both the regions in which our sites are located and the sector in which we operate. Together, these factors determine the overall biodiversity risk of a site, using 33 indicators that cover different aspects of biodiversity risk. A risk score is calculated for every indicator based on an assessment of the state of the biodiversity-related issue at a specific site and the dependency/impact of the sector on this indicator. Dependency in this context means that the selected sector relies on ecosystems, for instance to provide water and wood, or to regulate and mitigate environmental impacts. On the other hand, sectors have an impact on biodiversity at their sites, for example through direct or indirect exploitation, pollution and land-use changes (including conversion, degradation and changes to ecosystems).

Physical risks were assessed based on our dependency on intact ecosystems and our exposure to ecosystem degradation and natural hazards. Sites located in regions with high water scarcity or poor soil conditions may be exposed to greater physical risks. The BRF assesses these risks by taking into account the local environmental conditions and the dependency of the industry on ecosystem services. The tool also assesses transition risks by considering how political changes, consumer trends, and technological developments could affect the business activities of a sector.

At present, Beiersdorf does not consider systemic risks in its assessment and has not directly consulted affected communities on the materiality assessment of shared biological resources and ecosystems.

None of our production centers coincide with biodiversity-sensitive areas as defined in the WWF’s BRF. Therefore, the activities at these sites neither negatively affect these areas, nor lead to deterioration of natural habitats or the habitats of species. We have not so far assessed whether we need to implement actions to mitigate the impact on biodiversity associated with our business activities, as set out in Directive 2009/147/EC of the European Parliament and the Council.