CLIMATE CHANGE: MITIGATION AND ADAPTATION

CLIMATE MANAGEMENT: RISKS AND OPPORTUNITIES

Grifols recognizes the importance of informing its interest groups on the company’s climate-change impact and the measures in place to manage associated risks and opportunities. In 2019, Grifols analyzed its management of climaterelated risks and opportunities following the guidelines established by the Task Force on Climate-Related Financial Disclosures (TCFD), which focus on four main areas: governance, risk management, strategy and establishment of metrics and objectives.

1. GOVERNANCE

THE SUPERVISION OF CLIMATE-RELATED RISKS AND OPPORTUNITIES IS INTEGRATED INTO GRIFOLS’ CORPORATE GOVERNANCE STRUCTURE, WITH THE BOARD OF DIRECTORS ASSUMING THE GREATEST RESPONSIBILITY

The Board of Directors is responsible for approving the corporate risk policy, corporate responsibility policy and environmental policy. These integrate the management of environmental risks associated with regulatory changes and the establishment of commitments to mitigate climate risks. The Board of Directors approved this report, which includes climate-change objectives and performance markers.

The Executive Committee regularly supervises Grifols’ performance with regard to the Environmental Plan, including indicators and lines of action linked to climate change. It also supervises this report, which includes information on Grifols’ performance in regards to climate issues.

The Chief Industrial Officer (CIO), in addition to serving on the Executive Committee, is a member of the Environmental Committee. The CIO is responsible for regularly updating the CEOs on the company’s environmental performance, including climate-change issues. The CIO also approves the Environmental Plan and the economic and human resources required to meet the objectives. In addition to approving the Grifols Energy Policy, the CIO oversees the Global Facilities Department, which is responsible for the approval of investments related to energy efficiency projects and control of energy expenditures and atmospheric emissions.

Finally, the Risk Committee, which reports to the Board of Directors, is responsible for developing the risk management model and supervising the most relevant risks, including those related to climate.

2. RISK MANAGEMENT

In 2019, Grifols adapted its system for identifying climate risks and opportunities to reflect the TCFD framework. Based on its internal risk management procedure and Task Force recommendations, the company prioritized its risks and opportunities (both physical and transitory), taking into account their probability of occurrence and financial impact on previously defined time horizons. To this end, the following physical risks and their financial impact were determined as relevant:

GRIFOLS ANALYZES AND MANAGES CLIMATE RISKS AND OPPORTUNITIES FOLLOWING THE TCFD RECOMMENDATIONS
EVALUATION BY THE CARBON DISCLOSURE PROJECT (CDP) SHOWS THAT GRIFOLS TAKES MEASURES TO REDUCE ITS ATMOSPHERIC EMISSIONS AND THEIR NEGATIVE IMPACT ON CLIMATE CHANGE

In line with its internal risk management procedure, Grifols decided to diversify its production, establish contingency and emergency plans, design facilities to withstand extreme weather events and reduce water consumption in its manufacturing processes to effectively manage these risks.

Using the same aforementioned method, Grifols defined the following opportunities as relevant and estimated their associated financial impacts:

In order to manage these relevant opportunities, Grifols integrated eco-efficiency and circular economy objectives into its Environmental Plan 2020-2022. It also predicts access to new markets through new diagnostic solutions to address the possible emergence of new needs arising from climate change. Lastly, the company manages its resilience or adaptive capacity by continuously promoting innovation and development, including the design of high-efficiency technologies.

3. STRATEGY

As mentioned in the “About Grifols” section, the company’s corporate strategy includes business excellence and innovation as two of its fundamental pillars. Both rely directly on climate-change objectives that are outlined in the Environmental Plan and are driven by the risk and energy policy. In this way, climate-related risks and opportunities are interwoven into Grifols’ strategy and decision-making framework.

Climate risks and opportunities affect Grifols’ business and financial strategy and planning, particularly in the areas of operations, products and services. For this reason, climate change is used as an input in operational cost planning and capital allocations, especially when implementing eco-efficiency measures and strategies to reduce atmospheric emissions. Grifols’ Environmental Committee also considers existing and future regulatory requirements.

Since the risks determined as relevant are physical, Grifols’ climate strategy also includes a qualitative analysis of future physical scenarios in Spain and the United States.

Taking into account the worst-case physical scenario provided by Spain’s State Meteorology Agency (RCP 8.5 2046-2065), Grifols has a robust strategy with respect to its current management model. Nonetheless, this scenario could increase the relevance of risks in the Murcia plant, where the associated financial impact of water scarcity could rise. Grifols currently manages these risks and specifically designed the plant to enhance its water consumption efficiency. That said, the company is aware that it must pay particular attention to this region to increase its strategic resilience.

Using the World Resources Institute’s risk mapping tool, WRI Aqueduct Water Risk Atlas, Grifols also considers future physical scenarios in the United States. These scenarios indicate that the variables in 2040 would not be substantially affected in North Carolina or California. As mentioned in previous yearly reports, Grifols is aware that its California plants are located in regions with high levels of water stress. As a result, it makes concerted efforts to reduce water consumption as part of a robust and resilient long-term strategy.

4. METRICS AND OBJECTIVES

GRIFOLS HAS REDUCED THE INTENSITY OF ITS CO2 EMISSIONS BY 10.5% SINCE 2016

Grifols continuously measures and monitors the degree of fulfillment of its environmental programs, allowing the company to mitigate its relevant physical risks and leverage transitional opportunities. These programs include both qualitative and quantitative objectives aimed at reducing atmospheric emissions (currently measured in reduction of tons of CO2e) and decreasing water consumption to manage risks associated with water shortages. Within the framework of the European Union objective, Grifols also commits to using 70% of renewable electric energy by 2030.

In regards to the link between the remuneration policy and performance indicators, it should be noted that the Energy Manager has incentives tied to energy-efficiency improvements in Grifols’ production processes. Finally, it is worth noting that the company is not subject to an emission trading scheme, nor does it have an internal carbon price.

Grifols is analyzing its areas of improvement with respect to the TCFD recommendations in its four main areas: governance, risk management strategy, metrics and objectives. That is why it plans on designing an action plan to continue improving its performance and communication initiatives on climate-related issues.

Every year, Grifols participates in the Carbon Disclosure Project (CDP), which assesses the firm’s corporate strategy and performance related to climate change. The questionnaire for CDP2019 was submitted in June. In 2019, Grifols earned a “B” management rating. These results underline Grifols’ efforts to effectively reduce atmospheric emissions; measure and manage their impact, risk and opportunities; and develop a solid policy and strategy to carry out steps to minimize the negative impacts of climate change.

EMISSIONS

Grifols calculated its carbon footprint to identify the greenhouse gas emissions generated by its operations and their impact on climate change. Calculations follow the Greenhouse Gas Protocol (GHG Protocol) methodology, the international standard to measure and report greenhouse gas emissions.

IN ACCORDANCE WITH THIS METHODOLOGY, EMISSIONS ARE CATEGORIZED INTO THREE DISTINCT SCOPES

Globally, Grifols’ efforts have allowed to reduce the intensity of its CO2 emissions by 10.6% since 2016. Within the framework of its current environmental program, the company works to achieve its goal of reducing CO2 emissions in 32,360 metric tons by 2022.

Total emission in 2019 was 330,521 tons of CO2 equivalent, an 11.7% increase from the previous year. This increase stems mainly from higher electricity consumption associated with the integration of nearly 40 plasma donation centers (Bioscience Division) in the U.S. and Germany, which caused an rise in all consumption indicators associated with this division and these countries. The expansion in the plasmadonation network had similar repercussions in other aspects such as daily commutes or waste generation.

On the other hand, despite the reduction in electricity consumption in the Bioscience Division’s facilities in Spain, the emission factor associated with the distribution company’s electricity mix led to higher levels of carbon dioxide emissions with respect to the previous year.

Refrigerant gas leaks rose by 11% compared to 2018 as a result of a greater number of plasma centers in the U.S. and Germany, whose freezers for collected plasma require refrigerant gases. For this reason, the 2020-2022 Environmental Plan includes specific objectives to replace the Bioscience Division’s current refrigerant installations in Spain and Germany with systems whose refrigerant gas has a lower or zero Global Warning Potential (GWP), depending on the equipment.

Additional energy-related objectives in the upcoming plan include the implementation of a photovoltaic plant in the Hospital Division’s facilities in Murcia (Spain) and the purchase of 18 million kWh in 2021 through Power Purchase Agreements.

Atmospheric emissions of other pollutants such as NOx, CO and SO2 are generated by the combustion of natural gas in Grifols’ production facilities, as well as by the fuel used in the generators. The emissions of these compounds in its production plants are below the limits established by the corresponding environmental authorities.

A table is included at the end of this chapter which summarizes the scopes based on the GHG methodology.

INITIATIVES THAT REDUCE EMISSIONS

 

LIMITING AIR TRAVEL

Grifols is cutting back on air travel to reduce the environmental footprint caused by aircraft emissions. Despite its growing employee base, the company’s air travel only increased by 5.5% compared to 2018. The company is committed to using video conferencing, which increased by 115% during 2015-2018, and other online collaborations to decrease its frequency of air travel.

GRIFOLS OFFSETS THE ENVIRONMENTAL FOOTPRINT OF ITS BUSINESS TRAVEL

Grifols signed an agreement with Air France, KLM and Delta Airlines to offset its travel-related carbon footprint. This accord – a groundbreaking initiative for a company in the healthcare sector – is important given the global reach of Grifols’ production, industrial and commercial operations. As part of this commitment, CO2 emissions generated by employee travel via these airlines are calculated and offset by projects aimed at mitigating CO2 emissions, such as reforestation efforts and the generation of renewable energy.

As a result of this agreement, accredited by the Gold Standard Global Goals, in 2019 1,500 tons of CO2 were offset in a reforestation project in Panama. The company plans on rolling out similar agreements with other airlines in the coming years.

Grifols also launched an initiative to offset CO2 emissions generated by corporate car rentals. Grifols Viajes joined several sustainability programs in collaboration with Enterprise Rent-a-Car. In 2019, 369 tons of CO2 emissions were offset in projects to reduce greenhouse gas emissions, including the capture of gases generated by landfills, agricultural energy, clean energy and forest-management projects.

DRIVING BIODIVERSITY THROUGH GRIFOLS WILDLIFE

The Grifols Wildlife program has continued its efforts to promote biodiversity to help mitigate the effects of global warming and encourage absorption of CO2. Highlights in 2019 included the installation of bat houses, the extension of a network of trails and the construction of four bridges made out of recycled plastic from Grifols’ empty plasma bottles. The setting for these projects was the natural area in Clayton, where the company owns more than 121 hectares of forest certified by Wildlife at Work and Corporate Lands for Learning, an initiative of the Wildlife Habitat Council.