Climate scenario analysis for a German based OEM

The challenge

In an era of increasing climate-related uncertainties, the automotive industry stands at a crossroads, presented with both challenges and opportunities. Our client has taken proactive steps to address these challenges by entrusting us with the task of conducting a comprehensive assessment of physical risks, including an evaluation of economic activities at approximately 30 locations in 11 countries. 

This assessment complies with the latest regulations of the EU taxonomy DNSH 2 criteria (Annex I) and the probable physical risk exposures and vulnerabilities within its operations and supply chain has been successfully identified. This analysis ensures that proactive measures safeguard the assets and protect the production sites and supply chain against potential disruptions.

Our approach

PwC’s assessment followed the EU Taxonomy Climate Change Mitigation Act (Annex I) to identify material risks of 28 acute and chronic physical hazards across the global manufacturing and key supply chain locations using geolocation-specific climate scenario data.

In the first phase of the analysis, potential material risks were identified, taking into account science-based hazard-specific thresholds. In phase II, vulnerability aspects based on the business model and already existing adaptation measures on regional / local level were incorporated into the analysis in order to derive the necessity of additional adaptation solutions. The results were discussed with the central stakeholder and distributed to the responsible at the production sites.

To ensure accuracy and reliability of our results, PwC’s climate experts have utilised the most up-to-date scientific knowledge and peer-reviewed publications as well as best practice.

Added value

The initial analysis of potential physical risks to the performance of the OEM's economic activities has been completed in phase I, revealing that 97% of the analyzed locations are potentially affected by physical risks.

This was followed by phase II, which included the vulnerability assessment based on the business model and potential adaptation solutions in order to increase the resilience and manage the identified risks.

The results of the analysis were integrated into the enterprise risk management and continuously tracked at the respective level. In addition, the identified physical risks were bundled in an adaptation plan so that the continuous improvement process can be monitored.

The results demonstrated the method’s applicability for the OEM thus the method was further applied to other affiliates of the OEM.