Response to Climate Change

It is evident that climate change requires urgent action. Whilst the Group has implicitly considered climate change factors in strategic decisions over the last number of years, it was recognised that this was required in a more formal and robust manner in FY2022. During the year, we strengthened our analysis of climate related matters, as well as our governance and reporting of them. This included strengthening our contributions and commitments to decarbonising our value chain as well as reviewing our strategies around climate risk management and adaptation.

Moreover, as part of our efforts to understand the impacts of climate change on our business, we have begun alignment towards the Task Force on Climate-related Financial Disclosures (“TCFD”) recommendations with the help of external consultants.

In accordance with LR 9.8.6R(8) and LR 9.8.7, we are required to include a statement in this Annual Report and Financial Statements setting out whether the Group has included climate-related financial disclosures consistent with the TCFD Recommendations and Recommended Disclosures (“TCFD Recommendations”). We have included climate-related financial disclosures in this Annual Report and Financial Statements consistent with the TCFD Recommendations, except for the following:

• Formally embedding climate-related risks and opportunities (“CROs”) within our strategy and financial planning through the use of quantitative scenario analysis (Recommendations Strategy (b) and (c))
• Identifying and monitoring metrics and targets aligned to all of the climate-related risks and opportunities that were identified as part of our qualitative scenario analysis (Recommendation Metrics & Targets (a) and (c)).

Our climate-related disclosures are set out below. This is the first year we have used the TCFD framework to support our reporting and we are committed to ensuring that we continue to improve our climate-related disclosures over the next year.

Governance

The Board is responsible for overseeing climate change risks and opportunities and considers climate-related issues when reviewing and guiding the Group’s strategy, as well as when undertaking any major plans of action or capital expenditure. C&C’s climate-related issues are also integrated into decisions regarding C&C’s annual budgets, business plans and performance objectives. The Group is committed to ensuring climate-related issues are considered when setting the Group’s risk management policies going forward, as discussed within the Risk Management section of this report on page 51.

Additionally, during the year, the Board has undertaken initial training on climate change related matters and the TCFD framework. A short list of CROs and the output of the scenario analysis conducted (see strategy section on page 47) were presented to the Board in March 2022. During the remaining months of 2022, we intend to carry out more extensive training on ESG and climate change as well as the associated risks and opportunities, in order to increase our leadership’s knowledge, understanding and awareness of climate related issues.

Elements of the Board’s oversight of climate change have been delegated to the ESG Committee which was established in September 2020. See page 107 of the ESG Committee report which contains its responsibilities and matters considered during the year. The Chair of the ESG Committee is responsible for providing the Board with an update around all ESG matters, including climate change. The ESG Committee is supported by a number of other Committees and Working Groups:

Risk & Compliance Committee: In our FY2021 Annual Report we included Sustainability and Climate Change as one of our principal risks. Therefore, in October of 2021 we established a Risk & Compliance Committee which is responsible for monitoring and managing this principal risk. This Committee is composed of executives and various levels of management from across the Group, and will meet bi-monthly. The Risk Committee for Sustainability and Climate Change reports to the Audit Committee; however, we are in the process of evaluating and developing additional reporting lines which will see the Risk Committee for Sustainability and Climate Change reporting also to the ESG Committee in order to improve C&C’s oversight of climate-related risks and opportunities.

ESG Working group: This is a core working group focused on initiating and overseeing projects related to ESG matters. Supporting the ESG working group are a number of ESG Champions across the business. The responsibilities of the Champion role focus on providing upward feedback on ESG initiatives to the ESG Committee.

We intend to roll out training on climate-related matters to key colleagues including ESG Champions and Procurement / Buying teams so that they will be able to contribute towards the update of risk registers and the identification of climate-related risks.

The Directors’ Remuneration Committee report on page 117 contains details on the ESG related metrics considered by the Committee. Specifically in relation to climate change, the following metrics are relevant:

1. Scope 1: direct emissions from owned or controlled sources, which includes emissions from Group-owned or operated facilities and vehicles.Scope 2: indirect emissions from the generation of purchased energy e.g. electricity, steam, heat and cooling.

Strategy

The Group has pledged to be a carbon-neutral business by 2050. We have grounded our emissions reduction targets in climate science through the Science Based Targets initiative (‘SBTi’), which will be validated by the end of 2023 at the latest as discussed on page 65 of the Responsibility Report.

Our Approach to Identifying Climate-related Risks and Opportunities.

In FY2022 we collaborated with external consultants to support us in identifying the Group’s CROs and to carry out a qualitative scenario analysis to understand the impact of the identified risks on our business. We completed various workshops involving our external consultants and a range of key stakeholders within C&C to consider potential CROs. Throughout this process, we utilised our existing Risk Management framework (as described on page 34 of the annual report) to assess the impact and the likelihood associated with each CRO. To take into consideration the longer term effects of climate change we redefined the Risk Time Frame.

The below time-horizons, which focus on when the identified CRO is likely to begin having a material impact on the business’ goals and objectives, were approved for use by the ESG Committee:

Our Identified CROs

Using the process outlined above, we identified a “long list” of 38 CROs which was provided to the ESG Committee. We assigned each one a specific time horizon, impact level and likelihood and from this we prioritised 5 risks and 2 opportunities (“short list”) based on their overall rating.

Based on these shortlisted CROs, in FY2023 we will further develop additional targets and metrics that will allow us to manage these risks / leverage these opportunities, as well as measure our progress against them.

While the above represent the risks and opportunities that we have identified as being the most relevant to C&C at this time, we will continue to monitor the risks that we have identified as part of our long list and consider emerging CROs as new climate data and policies emerge. We expect this list to evolve over time. We also continue to actively monitor the changing landscape of sustainability reporting requirements to ensure that we are meeting the reporting expectations of our key stakeholders including regulators, investors and customers.

Understanding the impact on our CROs through Scenario Analysis

As part of our efforts to identify, assess, and mitigate climate-related risks and opportunities we have carried out a qualitative scenario analysis using the Representative Concentration Pathways (“RCP”) Scenarios published by the Intergovernmental Panel on Climate Change (“IPCC”). For our qualitative analysis, we used the IPCC RCP2.6 (to support our analysis of transition risks) and RCP8.5 (to support our analysis of physical risks) scenarios to assess the impact of different temperature increases on our short list of CROs.

Under the RCP2.6 scenario, the main risk for C&C will be the increase in climate change levies and taxes that would have to be introduced in most countries to be able to reduce GHG emissions. However, there are also opportunities for C&C to leverage under this scenario. We are trialling the use of electric vehicles and investigating the use of hydrogen vehicles within our car and truck fleets in order to decarbonise our supply chain and lower our exposure to carbon taxes.

Under the RCP8.5 scenario C&C would be primarily exposed to the risks of water scarcity, flooding and changing crop yields, all of which will impact our production.

The effects of the temperature scenarios on the shortlisted CROs and their impact, as well as C&C’s mitigation of these impacts, is summarised in the following table:

Risk Management

C&C adopts a standard risk management framework which is discussed in detail on page 34. We have in the past considered a wide range of risks and opportunities relating to climate change and other environmental factors that were evaluated by senior operational managers and technical specialists. These include, for example: impacts relating to continuity and cost of supply of raw materials, water, waste, energy use and efficiency, packaging materials, customer and consumer requirements, regulation as well as brand and reputational issues. However given the increasing focus on climate, in FY2022 we completed a deep dive on CROs as described in the strategy section above. We have integrated the results of this assessment into our overall risk management system. Therefore, the identification, prioritisation, assessment and management of our ‘Sustainability and Climate Change’ risk is completed in a manner consistent with the Group’s other principal risks with the exception of the timeframe used (please refer to the Strategy section of the TCFD report on page 47).

For additional information regarding the climate-related risks identified and our activities to mitigate these risks, please refer to the Strategy section of the TCFD report on page 47. Climate change mitigation is a current and ongoing responsibility for the Risk Committee for Sustainability and Climate Change as highlighted as part of the Governance section of this report on page 46.

To be able to better manage the projected impacts of climate change, we are committed to the continuous improvement of our processes for identifying and assessing our climate-related risks. We also want to improve the bottom-up risk assessment process and we will roll out education and awareness training that will be carried out an operational level to enhance our risk identification processes.

Any changes to climate-regulation, or the emergence of new climate-related regulation is considered as part of our normal regulation assessment for the Group.

Metrics & Targets

To oversee our progress against our Group’s climate-related goals and targets we have set a number of climate-related KPIs in line with our sustainability strategy. These KPIs have been selected in order to monitor our progress against our targets and to help us manage the identified CROs. The metrics adopted are monitored using a financial control boundary, and were developed in alignment with international environmental frameworks, namely CDP and SBTI, as well as with guidance provided by GHG Protocol.

The Board recognises the importance of ensuring that we monitor our performance with respect to the CROs identified with tailored KPIs. Currently, through the measurement of Scope 1, Scope 2 and Scope 3 emissions along with its SBTi commitment, the Group is able to manage CRO 1, Climate Change Levy / Carbon Tax. Additionally, through the monitoring of water usage in C&C’s facilities, the Group is able to manage CRO 3 - Water scarcity reduces availability of water for production - even though there is additional work to be done around the metrics to monitor suppliers in this area. The Group also measures performance and historical progress with respect to waste management (for more information, see page 70 in the Responsibility Report). We recognise that further work on metrics and targets aligning to the remaining CROs is required and are committed to working on this during the next financial year.

Areas of focus for FY2023

In FY2023 the Group will carry out a quantitative scenario analysis to support the formal embedding of CROs within our strategic planning. Moreover, it will allow the Group to further assess the financial impact of climate-related risks and opportunities on our business.

As we mature in our understanding of C&C’s climate-related issues and the impact on our business, we will also continue to reassess the short list as risks and opportunities evolve. We will integrate additional metrics and targets to support us in mitigating and managing the identified risks and opportunities.

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