Our purpose is to provide optimal material solutions for the benefit of society. We believe that, used appropriately, plastics are frequently the best solution offering the lowest environmental impact for the long-term applications typically delivered by our customers.

As a new Chair, it is important for me to see that we can drive growth which is both sustainable and inclusive. Significant progress has been achieved in ESG matters in the past three years and we continue to work with all our stakeholders to enhance our corporate disclosures. Our efforts have been rewarded with external recognition. Zotefoams holds an MSCI AAA rating reflecting very good standards of governance and well-established social practices. And as 85% of our revenues arise from green activities, the London Stock Exchange has awarded Zotefoams the Green Economy Mark. Our ReZorce® mono-material barrier packaging product was named Best Recycled Plastic Product of the Year at the 2023 Plastics Industry Awards. We began reporting voluntarily against the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in 2021, ahead of statutory requirements. The recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD) were also considered during 2023. Following a preliminary gap analysis, the Board has concluded that the support of a specialist consultant is required to map nature-related dependencies, impacts, risks and opportunities against our internal controls framework. This work is planned for 2024.

We recognise that ESG is a journey and, as we continue to improve our sustainability performance, we will look to set increasingly ambitious targets in order to remain leaders in sustainability.

We have embedded ESG considerations within our risk and opportunity management process, described on page 45, through alignment with the Sustainability Accounting Standards Board (SASB) requirements and the Financial Conduct Authority (FCA) listing rule LR 9.8.6 R(8), which implements the TCFD recommendations. The risk management process aims to support the achievement of our strategic objectives through the identification and management of risks which may impact the long-term prospects of the Group. Corporate ESG objectives, which flow down to all areas of our operations and incorporate long-term aims, have been set and are frequently reviewed.

A Group Sustainability Steering Committee was formed in 2021 with Executive representation from all business units and locations. Its purpose is to ensure that the Group’s activities align with the expectation of stakeholders. Its responsibilities include:

• providing governance and setting the direction for environmental sustainability matters for the Group
• establishing environmental sustainability objectives and ensuring their continued suitability, adequacy and alignment with the direction of the Group
• monitoring that the risks relating to environmental sustainability are identified and appropriately mitigated by the relevant steering committees and reporting any exception to the Group Internal Controls Committee.

Our HR and Training Steering Committee manages social matters. Governance issues are managed by the Board.

The Board has ultimate responsibility for environmental governance and performance and oversees a system of policies, practices and procedures that are implemented Group-wide to support Zotefoams’ environmental objectives. The Group CEO is directly responsible to the Board for environmental performance. All environmental matters are overseen by steering committees which are chaired by the Group CEO in the UK or the appropriate responsible person in subsidiary companies). The steering committees meet quarterly and consider environmental risks and opportunities, overall performance, and the impact of current and impending legislation. Under the internal controls framework outlined on page 47, the Audit Committee monitors the Group’s risk management framework, including the review of risk matrices identifying key environmental risks and opportunities faced by the Group. 

The Group takes the reporting of all environmental incidents very seriously and requires employees to report all incidents, including any near misses. All environmental incidents are investigated by appropriate levels of management to ascertain the root cause of the incident and, wherever possible, working practices and procedures are improved to minimise the risk of recurrence. In 2023, there were no prosecutions, fines or enforcement actions taken as a result of non-compliance with environmental legislation (2022: none).

¹    The Information Security Management Sytems ISO 27001:2022 accreditation was successfully obtained for all stated locations in Q1 2024.

A decrease in Group energy usage of 458 MWh in 2023 mainly arose through better energy management across all sites. The year saw a continuation of our focus on energy reduction for the Group. Increased visibility and daily trend analysis were combined with improved energy and waste engagement.

Key metrics

Our sustainability targets, focus on the reduction of Scope 1, 2 and use-phase carbon emissions.

¹    The objective to halve the polymer purchased that is not used in the end-product is calculated on a running rate at the end of 2026, whereas the KPI provides intermediate targets for the full year.

See the environmental reporting guidelines

There were no significant environmental incidents during the year (2022: none). Previous years have been analysed against an internal categorisation introduced in 2018, guided by the environmental reporting guidelines.

Environmental incidents are categorised as follows:

Level 1 –
Reported to Environment Agency
(e.g. polluting incident)

Level 2 –
Reported to local authority
(e.g. waste concerns)

Level 3 –
Internal report only (e.g. small
granule spills)

The Company ensures that all environmental reports of incidents are taken seriously and appropriately investigated and that the responses given are appropriate to their level of impact or potential impact. 13 internally reported Level 3 incidents (2022: 15) relating to minor machine oil spills and plastic granule spills were recorded during the year, all of which were contained. The incidents are captured by daily inspections and actioned as required. The continued yearly decrease is attributed to high levels of safety observations, employee education and ongoing implementation of the 5S method to reduce waste and increase productivity.

We continuously review opportunities to reduce our energy consumption or switch consumption to renewable sources. Opportunities are prioritised and initiatives undertaken. These include both investment in equipment and changes to processes or behaviour. During 2023 we undertook the following initiatives:

In October 2009, the Company entered into a Climate Change Levy (CCL) agreement, which involves meeting specific voluntary targets to increase energy efficiency and reduce carbon dioxide (CO₂) emissions. Provided the Company meets the requirements of the CCL agreement, it receives a rebate on its electricity bills and is also exempt from the Carbon Reduction Commitment Scheme for the plastics sector; the scheme is run by BPF Energy Limited, to which unadjusted SEC figures are reported quarterly. The scheme will run up to 2025.

The Company measures energy efficiency by taking energy consumption and dividing it by the amount of material (in kg) that passes through high-pressure autoclaves. The increase in production of our HPP foams, which generally require more processing energy than polyolefin foams, prompted us to update these metrics to be product-mix neutral in 2018. In 2023, our adjusted energy efficiency measure, Specific Energy Consumption (SEC), decreased 10% to 7.73 kWh/kg (2022: 8.58 kWh/kg), continuing a downward trend initiated in 2015. In 2023, the Company completed its third assessment under the Energy Saving Opportunity Scheme (ESOS) and remains compliant.

The SEC value has been reported in the Annual Report as a mix-adjusted value since 2018. This allows a product-mix-neutral assessment of energy efficiency improvements made.

Zotefoams’ products are used globally to improve people’s lives and reduce energy consumption, primarily through insulation and weight reduction. The processes we employ to create these foams allow us to use less raw material and produce lighter foams than rival processes, both of which are beneficial for carbon reduction. In making these foams, energy (both gas and electricity) is the main source of carbon emissions from our facilities.

Overall carbon emissions for 2023 were 13,335 metric tonnes (2022: 12,961 metric tonnes). Despite the Group’s energy consumption decreasing by 0.7% in 2023, carbon emissions increased by 2.9% due to an increase of 7% in the electricity conversion factor used in their calculation.

The methodology we have used is in accordance with the guidance published by the Department for Environment, Food and Rural Affairs in June 2013. We have only included emissions for which we are directly responsible. We have not included emissions for activities over which we have no direct control. For example, we have included business mileage on a company van and mileage claimed by employees in the UK, but not other forms of business travel, such as travel made by employees elsewhere in the Group or travel using public transport or air travel.

Global carbon emissions

¹    We do not generate our own energy.

Global pollutant emissions

NO_X and SO_X calculated from Scope 1 emissions.
Volatile Organic Compounds (VOCs) and Hazardous Air Pollutants (HAPs) measured on a number of typical production days at factory emission points and scaled for total annual production volumes.

Many companies consider carbon offsetting. Zotefoams’ view is to report as a primary metric the absolute carbon emissions calculated using the UK government carbon cost of energy. We buy electricity from renewable resources, wherever available, and we do not buy carbon credits or subscribe to offset schemes such as tree planting or felling avoidance. This is the primary reason we do not set a “net zero” carbon target for the Group.

To facilitate a comparison with those who consider renewable electricity to have a zero-carbon footprint, our total carbon emissions in 2023 would be 7,055 tonnes, 53% of that quoted above.

While none of our sites are located in regions where water is scarce, we recognise that water usage is a key environmental metric which supports our sustainability proposition. Our water consumption is metered and we have specific programmes to improve efficiency and reduce water usage. Our largest contributor to water usage is our Croydon plant. Continuing a trend started in 2020, water usage decreased by 14% in Croydon in 2023 following several successful projects delivered by cross-functional teams. Minor increases in water usage in our other sites were due to higher production volumes. Work continues to monitor and ameliorate water usage.

1. Our Croydon, UK plant represents 82% of the water used by the Group. Although Croydon is identified as an area of high Baseline Water Stress by the Water Resource Institute, our plant is not at high risk of water scarcity or of impacting local communities’ water supply. No water was withdrawn and not consumed.

In 2021, Zotefoams put in place a Group-wide waste hierarchy framework to support decision-making on waste management. The waste hierarchy ranks options on the basis of environmental outcomes and seeks to encourage the alignment of operating improvements with minimising the impact of waste on the environment. The Group has made sustained progress through the waste hierarchy framework.  Waste recycled has increased from 27% in 2021 to 50% in 2023. Of the waste we were unable to recycle, 63% now goes to an energy recovery facility, compared to 20% in 2021. This has significantly reduced the waste we send to landfill from 58% in 2021 to 19% in 2023.Targeted recycling training through staff briefings has greatly helped gain traction and engagement at all levels. In 2023, a new collaboration with Biffa brought additional expertise and helped deliver further gains in Croydon, where we have seen a significant improvement from 15% of waste being recycled in 2021 to 51% in 2023. Overall, waste that is not recycled by the Group has decreased from 2,268 tonnes in 2021 to 1,413 tonnes in 2023.

Hazardous waste constituted only 0.5% of the total Group waste in 2023. This remarkably small figure is due to our unique manufacturing process. See pages 18 to 19.

Recognising the key role to be played by plastics companies in recycling, Zotefoams became a member of RECOUP in January 2024. RECOUP is the UK’s leading Plastics Recycling organisation and works across the plastic supply chain to promote best practice, provide information and aid the sustainable development of UK plastic recycling. 

¹                 Excludes India, where waste generated is not material.

²                 2022 was the first year these metrics were reported.

Our climate-related financial disclosures for the financial year ended 31 December 2023 in accordance with the Financial Conduct Authority (FCA) listing rule LR 9.8.6 R(8) are provided below. The rule requires relevant companies to report on a ‘comply or explain’ basis against the TCFD recommendations. We have considered our ‘comply or explain’ obligation in respect of the 11 TCFD recommendations which we fully comply with. All page references below are to our 2023 Annual Report.

Opportunities

Short-term: Our business model is centred around sustainability. The opportunities available to Zotefoams are detailed on pages 20 to 25. Details of our strategic objectives, including those relating to sustainability and climate change, are provided on pages 28 to 30. Progress has been made against the sustainability targets previously set. See page 67.

Medium and long term: We believe the benefits of plastics will be recognised and scarce resources will be managed to ensure optimal use and a circular economy. The processing of polymers uses less energy compared with many other materials which, with our technology benefit of producing lighter, longer-lasting products using less material and which have inherent thermal insulating performance, represents a significant opportunity as sustainability increases in importance.

Risk management

1. Describe the organisation’s processes for identifying and assessing climate-related risks
2. Describe the organisation’s processes for managing climate-related risks
3. Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management

Refer to our risk management framework on page 47 and environmental sustainability and climate change risk on page 51.

Metrics and targets

1. Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process
2. Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks
3. Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets

The SASB framework provides performance metrics for our functional steering committees to implement. See further details below.

Our Scope 1 and 2 emissions are disclosed on page 68. Our approach to managing Scope 3 emissions is detailed on page 65. The risks are managed through our risk management framework detailed on page 47.

Progress against our sustainability targets is detailed on pages 67.

In the table below, we list the principal risks most likely to be materially impacted by climate change. We also set out examples of events that could cause financial losses or impact our strategy.

Methodology

A risk assessment, looking at impact and likelihood, was conducted reviewing three climate change scenarios and five risk events. The assessment was first undertaken by the Executive team and later revised following review with the entire Senior Management team. The following methodology has been used to assess the potential risk impact and the likelihood of the risk event.

▲ Very low  ▲▲ Low   ▲▲▲ Medium   ▲▲▲▲ High    ▲▲▲▲▲ Very high

Likelihood of the risk event

The following risk events arising from climate change or the transition to a low-carbon economy were considered:

• physical risk: adverse weather event disrupts manufacturing or supply chain
• significant increase in energy costs during transition: manufacturing costs, raw material costs, transport costs, inflationary pressures
• significant taxation increase during transition: carbon tax, plastics tax, waste tax
• significant shift in market demand pattern during transition: move from plastics or to circular plastic products only; increased demand for thermal insulation and lighter weight
• significant increase in water costs: directly or indirectly through taxation or levy.

The ongoing transition to a low-carbon economy was considered through the prism of achieving global net zero carbon emissions to limit global warming. Three scenarios were considered: no target, net zero by 2070 and net zero by 2050. The transition at the global and national levels brings about political, legal, economic, technological and other changes which produce transitional risks. Transitional risks primarily affect economic performance, which we have considered in terms of our planning cycles of 1 year, 1-5 years and >5 years.

There are significant risks from climate change and the impact increases with faster transition to a low-carbon economy. The impacts of climate change and the transition to a low-carbon economy are no greater than other risks faced by the business such as energy pricing and currency fluctuations. Our core products present opportunities in a low-carbon economy and the mitigations already in place for the current slower transition rate will help if the rate of transition increases.

SASB standards identify the subset of ESG issues that are reasonably likely to have a material impact on the financial performance of the typical company in an industry. The following table summarises our response to the sector-specific standards for chemicals companies.

1. Substances of very high concern under REACH and the EU’s Restriction of Hazardous Substances Directive or substances listed under California Prop 65.
2. Substances controlled by the Montreal Protocol, Stockholm and Rotterdam Conventions, GHS category 1 and category 2 health hazards.

Please see the 2023 Annual Report for the full social section of our ESG report.

Please see the 2023 Annual Report for the full governance section of our ESG report.