Transition plan for climate change mitigation [E1-1]
NAVIGATING CLIMATE CHANGE RISKS AND OPPORTUNITIES [ESRS 2 IRO-1]
In Fiscal 2022, in order to identify and prioritize material climate-related risks and opportunities, we followed a three-step methodology, combining a hybrid approach that integrates "bottom-up" insights from operational teams with "top-down" oversight from senior management. The outcomes of this risk analysis also informed the more recent double materiality assessment conducted in Fiscal 2024.
- Risk identification: the first step is the identification of risks that may impact Sodexo’s ability to achieve its objectives, whether at site, country, regional or Group level. In addition to individual interviews with key stakeholders, we used other risk identification methods such as surveys and risk registers.
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Risk evaluation: risks identified in the previous step are then evaluated using three risk criteria:
- impact – the effect or consequence the risk will have,
- likelihood – the frequency or probability of the risk occurring,
- level of control – the level of control already in place to reduce the risk.
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Risk prioritization: a cross-functional team in collaboration with external experts evaluated and prioritized climate-related risks and opportunities using the Task Force on Climate-Related Financial Disclosures (TCFD) framework, which categorizes risks into physical and transition risks:
- Physical risks: acute event-driven risks resulting from climate change such as an increase in severity in floods, cyclones or hurricanes, and chronic risks that result from shifts in longer term weather patterns such as higher temperatures causing more heatwaves;
- Transition risks: the policy, legal, technology and market change risks that may arise for a company transitioning to a lower carbon economy. Further reputational risk may also occur if a company fails to transition fast enough or meet stakeholder expectations in relation to climate change.
The assessment covers all phases of the value chain, as all types of risks are identified, for example difficulties to access resources (upstream), reputational risks related to clients and consumers (downstream), technology risks (direct operations, upstream and downstream).
26 physical and transition risks have been identified, all of which were considered relevant for Sodexo activities: policy and legal risks, technology-related transition risks, reputational risks, as well as chronic and acute physical risks. The magnitude of each risk occurring was assessed and broken down for Food and Facilities Management services. While likelihood or the probability of occurrence was considered during the evaluation phase, it is not disclosed to maintain focus on impact and relevance across Sodexo's services. In addition, the analysis was conducted using regional-level climate and economic data. While not yet based on geospatial coordinates for individual sites, the modelling reflects the diversity of Sodexo’s operating environments and provides a robust foundation for assessing both physical and transition risks. The outcome of this analysis is detailed in the table below, including the different time horizons taken into account when assessing the impact.
During the risk assessment, we did not identify assets and business activities that are incompatible with or need significant efforts to be compatible with a transition to a climate-neutral economy.
| Description | Time horizon | Value Chain | Food Services | FM services | |||
|---|---|---|---|---|---|---|---|
| Physical risks | |||||||
| Chronic | |||||||
| Coastal erosion | Coastal erosion, driven by sea level rise and stronger storms, threatens properties and assets, causing damage to buildings and infrastructure. |
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3 | 2 | |
| Flooding – regulation | Regulations (including additional disclosure requirements, land use restrictions and new building standards) in response to increased flood risks. |
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2 | 1 | ||
| Pests and diseases | Rising temperatures and shifting rainfall may trigger more crop pests and diseases, such as fungal blight or insect infestations, disrupting agricultural supply chains and raising food costs. |
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4 | 2 |
| Reduced biodiversity | Reduced biodiversity from large-scale climate change, limiting access to natural resources. |
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4 | 1 | ||
| Water use rights and regulations | Water scarcity leading to higher costs, stricter use regulations, and competition for water rights, including fishing restrictions. |
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4 | 4 | ||
| Acute | |||||||
| Hailstorms | More frequent and severe hailstorms from climate change causing damage to crops, buildings, equipment, property and infrastructure. |
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3 | 1 | |
| Land mass movements | More frequent landslides, sinkholes, and other land movements from climate change causing damage to buildings, equipment, property and infrastructure. |
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3 | 2 | |
| Windstorms | More frequent and intense windstorms (hurricanes, cyclones, typhoons, tornadoes) causing damage to crops, buildings, equipment, property and infrastructure. |
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3 | 1 | |
| Wildfires | More frequent and severe wildfires causing damage to buildings, equipment, property and infrastructure. |
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3 | 2 | |
| Chronic and Acute | |||||||
| Drought | Prolonged droughts increasing water scarcity and reducing agricultural productivity |
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4 | 3 | |
| Flooding - damage | Flooding from rising sea levels, storms, and snowmelt, causing damages to crops, buildings, equipment, property and infrastructure as well as disrupting power supply. |
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4 | 2 | |
| Soil degradation | Soil degradation from heavy rainfall, shifting precipitation, and climate-driven biomass changes, reducing agricultural products quality and availability. |
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4 | 1 | ||
| Temperature & humidity | More frequent and severe extremes in temperature and humidity. |
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4 | 2 | |
| Integrated Risks | |||||||
| Ocean | Rising ocean temperatures and changes in acidity from climate change reducing seafood quality and availability. |
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3 | 1 | ||
| Transportation - infrastructure | Sea level rise, erosion, and landslides damaging transport infrastructure, limiting access and service delivery. |
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3 | 3 | |
| Transition risks | |||||||
| Policy and Legal | |||||||
| GHG emissions regulations (including removal policies) | Stricter GHG policies (carbon tax, cap-and-trade, removal rules) requiring GHG emissions reductions and carbon capture. |
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4 | 4 | |
| Global trade policies | Stricter trade policies and regulations could place additional pressure on suppliers (including SMEs) to meet higher environmental standards, potentially leading to supply chain disruptions, reduced supplier capacity, or increased procurement costs for Sodexo. |
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2 | 2 | ||
| Reforesting/afforestation | Government policies promoting reforestation and afforestation, leading to increased land competition, higher costs and fewer new buildings. |
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2 | 2 | |
| Removal of energy subsidies | Insufficient public support or reduced subsidies for renewable energy could slow the energy transition, limit access to affordable green electricity, and increase Sodexo’s operational costs in some markets. |
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2 | 2 | ||
| Transportation emissions reductions regulations | Tighter transport emissions regulations could raise logistics costs and operational complexity, especially where low-carbon infrastructure remains limited. |
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3 | 2 | |
| Technology | |||||||
| Increased competition from low carbon and/or energy efficient technology | Growing competitiveness of renewable and energy-efficient technologies through policy, investment, and innovation. |
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3 | 3 | |
| Reputation | |||||||
| Brand reputation | Reputational risks from consumer backlash over poor environmental practices or ties to unsustainable companies. |
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4 | 2 | |
| Both transition and physical risks | |||||||
| Climate-induced social conflict & migration | Climate change driving inequality, migration, and increased risk of social conflict. |
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3 | 3 |
| Consumer demand shift | Consumer demand shifting toward sustainable products and services. |
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4 | 2 | |
| Investor pressure | Rising investor pressure to improve environmental practices and cut GHG emissions. |
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2 | 2 | ||
| Other land-use policies | Climate-driven land-use policies requiring sustainable farming, raising costs and reducing differentiation. |
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3 | 1 | ||