Sustainability risk management
Risk management process at ANDRIZ aligns with ISO 31000 and COSO Enterprise Risk Management (ERM) standards, focusing on identifying, analyzing, evaluating, mitigating, and monitoring risks. ANDRITZ conducts regular risk analyses within its operations and supply chains to identify and mitigate human-rights and environmental risks.
To ensure effective governance and accountability, ANDRITZ applies the Three Lines of Defense model as a foundational framework for risk and control responsibilities.
First Line: Operational management owns and manages risks directly in day-to-day activities.
Second Line: Risk and compliance functions support and monitor risk management practices.
Third Line: Internal audit provides independent assurance on the effectiveness of risk controls.
An internal control system ensures regulatory compliance and supports early risk detection. The Risk Management Committee reports on sustainability-related risks periodically to the Executive and Supervisory Boards, and the insights are embedded into operational decision-making and strategy development.
Climate risks
At ANDRITZ, understanding climate-related risks is key to building long-term resilience and identifying strategic opportunities. Our climate risk assessment is fully integrated into our enterprise risk management framework and supports our broader climate action.
We focus on two main types of climate risks: transition risks and physical risks, both assessed by third parties and ANDRITZ’s subject-matter experts.
Transition climate risks
Transition risks arise from the global shift toward a low-carbon economy and include regulatory, market, technological, and reputational changes. Our transition risk assessment is based on the internationally recognized Task Force on Climate-related Financial Disclosures (TCFD) framework and covers our full value chain, all business areas, and key regions.
We have evaluated transition risks using two IPCC Shared Socioeconomic Pathways (SSPs):
IPCC SSP1: A sustainable development scenario emphasizing more inclusive development that respects environmental boundaries.
IPCC SSP2: A scenario reflecting a continuation of current social, economic, and technological trends leading to maintaining historical patterns of development, including uneven progress in different regions.
Key risks identified include potential supply disruptions and rising costs associated with critical minerals and components, green steel, and bulk materials such as conventional steel. There is also a risk of delays or an inability to develop future technologies in a timely manner. In addition, regulatory developments such as CO₂ taxation and the expansion of the Emissions Trading System (ETS) present further considerations for the company’s strategic planning.
Transition risks are more pronounced under the SSP1 scenario, meaning that if current trends continue (SSP2), ANDRITZ is relatively resilient. Overall, the results show that ANDRITZ is well prepared for the transition to a more sustainable economy. Our broad sector presence helps reduce both the likelihood and impact of these risks. By delivering enabling technologies and using renewable raw materials, particularly in our Pulp & Paper and Hydro business areas, ANDRITZ is well positioned to seize opportunities arising from the green transition.
Physical climate risks
Physical risks refer to the potential impacts of climate change on our operations and assets, such as extreme weather events and long-term shifts in climate patterns.
We assessed physical risks using two IPCC scenarios:
SSP2-4.5: A medium-emissions scenario where emissions stabilize by 2050 and decline through 2100.
SSP5-8.5: A high-emissions scenario with emissions tripling by 2075 and global temperatures rising 3.3–5.7°C by 2100.
The analysis showed moderate exposure to physical risks through the 2030s, with key hazards including water stress, extreme heat, drought, and wildfires.
Our mitigation measures are closely aligned with both transition and physical risk assessments, supporting a comprehensive and forward-looking approach to climate resilience across ANDRITZ.
Biodiversity risks
ANDRITZ has initiated a structured assessment of biodiversity-related risks and dependencies across its operations, using globally recognized tools and frameworks such as ENCORE, IBAT and Taskforce for Nature Related Financial Disclosures (TNFD). This process supports the integration of nature-related considerations into our broader environmental and risk management practices.
Water risks
Our water risk approach is based on the Aqueduct Water Risk Atlas by the World Resources Institute, which we use to screen all locations within our environmental reporting scope. This screening helps identify and assess risks such as water availability, potential scarcity, and impacts on local communities and ecosystems. For each manufacturing site, the level of water stress is evaluated, and locations facing high or extremely high water stress are flagged and recorded in our reporting system.