67 Vodafone Group Plc Annual Report 2024
Strategic report
Governance
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Currently, Vodafone has insurance arrangements in place to cover loss or damage to assets from a range of natural disasters and weather-related events such as flooding, fires and storms (although the policies do not specifically refer to these as climate-related events). In recent years, we note that insurance claims have been made to cover damage to infrastructure. For example, in relation to flooding in Germany and wildfires in Greece and Portugal, these claims relate mostly to damage to our mobile access base station network, rather than our higher value assets, such as data or technology centres, and are not considered to be financially material at this stage. Based on our analyses to date, we have not identified any material financial risks relating to the cost or availability of insurance as a result of climate change. There are opportunities for value creation across the range of scenarios. In both the early and late policy action scenarios, there is potential for commercial growth from the sale of digital solutions that can help our customers to decarbonise their businesses. Whereas the no policy action scenario presents growth opportunities from sale of digital solutions that help our customers adapt to more extreme physical changes in the climate. Our CTP incorporates the management actions required to build resilience into our business in response to Vodafone’s priority climate-related risks and opportunities. Our latest analysis, outlined in this report, has informed the transition plan activities that have been integrated into our long-range business and financial planning cycle. Governance and accountability have been put in place to monitor and manage the implementation of the transition plan. Click to read our Climate Transition Plan: www.vodafone.com/ctp Resilience to physical risks Protecting our infrastructure assets from being damaged or disrupted by climate-related weather events is central to the climate resilience of our business and network services. Mitigation measures are built into the key stages of each asset’s life cycle, from acquisition to maintenance, and cover climate adaptation as well as damage response. During the acquisition of assets, including buildings and network equipment, we have policies and guidance in place to incorporate the assessment of environmental risks. Our internal technology resilience policy requires each asset to conduct a physical risk assessment annually, which includes evaluating environmental risks. We also have reactive measures related to asset maintenance in place, such as processes and teams dedicated to disaster recovery and business continuity. Lastly, we have insurance policies designed to transfer any significant financial impact of physical risks, which cover claims on asset loss and damage. Building resilience into our operations and network infrastructure is a well-established part of our business-as-usual process, irrespective of whether climate change has been explicitly named as a primary risk driver. We intend to continue to build resilience to the physical risks of climate change and intend to integrate any additional high-priority climate adaptation actions beyond our current planning, procurement, network resilience and business continuity practices into our CTP over the coming year. Resilience to transition risks Decarbonising our business model and improving energy efficiency will help to minimise our exposure to transition risks. We have set targets to reduce greenhouse gas (‘GHG’) emissions from our own operations and to become net zero across our full value chain by 2040 (including at least 90% absolute emission reduction, with any remaining emissions neutralised through high quality carbon offsetting). Read more about our Protect the Planet goals and strategy on pages 38 to 42
Our CTP includes workstreams on: – Climate-related policy – to formalise the role of our public affairs, legal and tax teams in identifying, monitoring and responding to the ever-evolving landscape of climate-related policy and regulation. – Power purchase agreements – to limit exposure to energy price volatility by increasing the proportion of renewable electricity purchased through power purchase agreements (‘PPAs’) as part of our energy procurement strategy. – Transition plan reporting – to manage our exposure to reputational risks such as greenwashing, by communicating clearly and transparently on our climate strategy and continuing to implement strong governance over the use of environmental claims in our brand, marketing and corporate communications. Realising opportunities Our most significant climate-related opportunity relates to developing new product lines to enable our enterprise customers to reduce GHG emissions, improve resource efficiency and protect or enhance nature. This enablement effect is a key pillar of our Planet strategy. Read more about our approach to enablement on page 41 Our CTP includes a workstream on ‘sustainability by design’. This is to develop and deploy more green digital solutions, such as IoT solutions for smart cities, buildings or lower-carbon transport and mobility, that can help our customers manage their environmental impact, whilst also minimising the negative environmental impact from the production of our products and services. Risk management The management of climate-related risks follows the process defined by our enterprise risk management framework, which is defined centrally and implemented in each of our markets. Our approach to climate-related risk assessment is outlined below. (1) Identify To identify potential climate-related risks and opportunities, we review the relevant sources of information such as media articles, publications, industry peer disclosures and industry white papers, in addition to reviewing our previous years’ analyses. We engage with relevant internal and external experts to gather views on the evolving nature of climate-related risks for the telecommunications sector and examples of any climate change impacts that might already be materialising. (2) Measure We assess the likelihood and severity of impact for each risk and opportunity identified. We simulate how the risks and opportunities could materialise over three time horizons, across a range of possible future scenarios. We review our scenarios analysis annually to reflect the most up-to-date information on climate-related trends. Read more about our definitions for scenarios and time horizons on page 66 In assessing the severity of an impact, we consider the relative extent of the potential financial impact through business value drivers such as increased costs, loss of revenue, asset impairment and damage to brand or corporate reputation. In assessing the likelihood of an impact, we consider the potential probability that it will materialise based on current trends, forecasts and projections and levels of uncertainty. We have conducted a quantitative scenarios analysis for physical risks in both Europe and Africa. For transition risks and opportunities, their severity and likelihood has been assessed qualitatively across our selected scenarios and time horizons. We are working towards estimating the financial value at stake from climate-related risks across our global business, which will depend upon the completion of a fully quantitative scenarios analysis for both physical and transition risks. We aim to complete this quantitative scenarios analysis (including transition risks) within the coming year.
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