Double Materiality Assessment
Mapping our material topics to corresponding ESRS topical standard
| Höegh Autoliners material topics | ESRS Topical standards |
|---|---|
| Climate change | Climate change (E1) |
| Pollution | Pollution (E2) |
| Biodiversity and ecosystems | Biodiversity and ecosystems (E4) |
| Waste and green ship recycling | Resource use and circular economy (E5) |
| Health and safety | Own workforce (S1) Workers in the value chain (S2) |
| Employment | Own workforce (S1) Workers in the value chain (S2) |
| Human and labour rights | Own workforce (S1) Workers in the value chain (S2) |
| Diversity and inclusion | Own workforce (S1) |
| Business conduct and corporate culture | Business conduct (G1) |
Introduction
For this year’s reporting, Höegh Autoliners has improved its double materiality assessment methodology, building on the assessment conducted in 2022. This was done in preparation for the next year’s reporting in accordance with the Corporate Sustainability Reporting Directive (CSRD) and guided by the European Sustainability Reporting Standards (ESRSes). The assessment focuses on both the company’s impact on the environment and society, and the external sustainability-related risks and opportunities to the business. The 2023 reporting includes improvements in both the assessments of impact and financial materiality, as introduced by the ESRSes.
We have conducted stakeholder engagement with a broad group of stakeholders, both internal and external, to identify impacts, risks, and opportunities (IROs) across our value chain. To the extent possible, and to the best of our knowledge, we have quantified the IROs and enriched them with qualitative assessments to reasonably score and prioritise them. We believe that our methodology, adjusted to meet the requirements set out by the ESRSes, and the results presented below accurately represent our identified impacts, risks, and opportunities.
What is a double materiality assessment?
In prior year’s materiality assessment, the focus has been on the impact materiality, meaning how an organisation is impacting the environment and the society. This could be negative impacts on climate change, or human rights and decent working conditions. IT could also be positive impacts through active work against anti-corruption in our supply chain. A double materiality approach includes the perspective of financial materiality, meaning the risks and opportunities from sustainability-related topics and events. This could be reputational risk caused by incidents or corruption, financial risks from implementation of new carbon taxes, or opportunities arising through development of sustainable shipping-services.
1. Financial materiality
A sustainability topic is material from a financial perspective if it triggers financial effects on organisations, ie., generates risks or opportunities that influence, or are likely to influence, the future cash flows and therefore, the organisation's enterprise value in the short, medium or long term, but are not captured by financial reporting at the reporting date.
2. Impact materiality
A sustainability topic is material from an impact perspective if the organisation is connected to actual or potential significant impacts on people or the environment and is related to the sustainability topic over the short, medium or long term. This includes impacts directly caused or contributed to by the undertaking and impacts which are otherwise directly linked to the undertaking's value chain.
Process steps
Our 2023 assessment have been improved compared to prior year’s assessments. The process has been more formalised and a larger number stakeholders have been included. The following steps were conducted:
Output from our double materiality assessment
Results
The results of the double materiality assessment highlight the areas where Höegh Autoliners is impacting the environment and society (impact materiality assessment) and where the organisation is exposed to sustainability-related risks and opportunities (financial materiality assessment). The results from this year’s assessment are all over in line with last year’s assessment. Topics standing out as the most important are climate change, own workforce, and business conduct. Other material topics are pollution, resource use and circular economy, biodiversity and ecosystems, and workers in the value chain.
Limitations and way forward
For this year’s reporting, we are only reporting aggregated results of our assessment illustrating topics concluded to be material for our organisation. Presentation and reporting on a sub-topic and IRO level will be introduced in our next year’s reporting, aligned with the disclosure requirements set out in the ESRSes. The structure of this report reflects the results of this year’s DMA and the topical structure of the ESRSes, however, the disclosure requirements follow the GRI guidelines.
Methodology and approach to double materiality assessment
Approach and assumptions
Scope and boundary of our assessment
The boundary of our assessment is set to cover the full value chain (where information of the value chain has been available), with a focus on our own operations and our first-tier suppliers. On the impact side, actual and potential negative impacts, as well actual and potential positive impacts are included within the boundaries of the assessment. The same applies for the financial risks and opportunities on the financial side.
| Impacts | Risks and opportunities |
|---|---|
| To score the impacts on environment and society, we have applied the parameters described in the ESRS guidance: Scale, scope and irremediable character. | To score the risks and opportunities for our business, we have applied the parameters described in the ESRS guidance: Financial consequence and likelihood. |
| 1. In the scoring process of the scale, we have assessed the magnitude of the impact on the environment or society. Scale was scored as low, medium or high. | 1. In the scoring process of the Financial consequence, we have assessed the potential financial magnitude of financial metrics (such as revenues, OPEX, Capex) in case the risk or opportunity materialize. Financial consequence has been scored using low, medium and high. |
| 2. In the scoring process of the scope, we have assessed the extent of the impact using indicators such as affected geographical areas, number of employees etc. Scope was scored as limited, medium or global. | 2. Likelihood has been applied to capture how likely it is that the financial consequence will take place. |
| 3. In the scoring process of the irremediable character, we have assessed the complexity of reversing the damage in terms of time frame and cost. This parameter is applicable for negative impacts only. Irremediability has been scored as easy to remediate, difficult/costly to remediate, or irreversible. | |
| For potential impacts, the parameter likelihood has been applied to capture how likely it is that the impact will take place. | |
| Likelihood has been scored from 1 to 5 (1 = remote, 2 = unlikely, 3 = likely, 4 = highly likely, 5 = near certain) | |
Time frames and scenarios
Time frames have been applied for both impacts, risks, and opportunities. We have used short-, mid- and long-term as guided by the ESRSes. Short-term is defined as 0-3 years, medium term is defined as 3-10 years and long-term is defined as more than 10 years.
Timeframes chosen for the double materiality assessment are based on Höegh Autoliners’ corporate strategy, and financial budget period to ensure comparability between strategic periods and sustainability assessments. The rational builds on the longer cycles in the shipping sector, internal strategy and sustainability initiatives and a medium-term target by 2030. Höegh Autoliners also operates an asset base with expected lifetime of 30 years.
Thresholds
In addition to our quantitative assessment in our scoring process, we have also conducted qualitative assessments where IROs have been difficult, or impossible to score. This approach have resulted in a score for each IRO. Whether a sustainability topic is considered material or not, depends on its highest scored IRO for that specific topic. In addition, the risk of a topic becoming material due to aggregation of low-scoring IROs, is assessed.
The threshold for determining whether a sustainability topic is material for our organisation has been set at “important”. All topics scored as “important”, “significant” or “critical”, either from an impact perspective, a financial perspective or both, are considered material.
Definition of thresholds
IROs that are unlikely to occur, and if they do occur, they will have a small impact or present minimal risk/opportunity. These IROs are typically of low priority and may not require immediate attention or extensive resources to address.
IROs that provide informative information or insights for understanding and managing IROs within the organisation. While not important, critical or significant, these objectives contribute to the overall risk management process and help stakeholders make informed decisions.
IROs that have a notable impact on the organisation’s operations, financial performance, reputation, or compliance with regulations. Addressing and managing these IROs is essential for achieving strategic objectives and maintaining stakeholder confidence.
IROs that can significantly affect the organisation’s ability to achieve its goals, sustain its operations, or meet stakeholder expectations. Managing these risks effectively is critical for safeguarding the organisation’s value and long-term success.
IROs that pose a severe threat or offer significant potential for the organisation. Addressing and mitigating these risks are paramount for ensuring business continuity, protecting stakeholder interests, and preserving the organisation’s reputation and viability.
Stakeholder engagement overview
In this year’s double materiality assessment, we have engaged with a larger group of stakeholders than we did in prior year’s assessments. Internal stakeholders have included board members, C-level individuals, internal subject-matter experts and employees. External stakeholders have included customers, investors, financial institutions, NGOs and consultants. Engagements have included workshops, interviews, one-to-one discussions, meetings and reviews.
Our internal stakeholder engagement policy emphasises active engagement and understanding of stakeholders’ positions and expectations. This ongoing dialogue shapes our sustainability efforts and processes and aligns with stakeholders’ interests. Insights from these engagements inform our business model and strategy, due diligence processes and the double materiality assessment, guided by international norms and codes.
In 2023, Höegh Autoliners engaged in several policy debates related to sustainable shipping. COP28 was one of the arenas where the Company’s CEO Andreas Enger was present and formed part of plenaries, panels and roundtable discussions around our vision for the future of shipping, and how we can contribute to decarbonise international shipping if we are able to create a level playing field with appropriate incentives for the uptake of greener fuel technologies.
Customers seek deeper partnerships to meet their decarbonisation commitments, driven by ambitious target setting and net-zero roadmaps, and compliance with increased regulation and reporting requirements. Our continuous discussions with the customers, and understanding their needs are crucial for our decarbonisation strategy to succeed.
Please refer to the table below for an overview of our key stakeholders, engagements and outcomes.
| Key stakeholders | How we engage | Why we engage | Examples of outcomes from engagements |
|---|---|---|---|
| Marketplace | |||
| Customers | Customer support and discussions in day-to-day operations | Understand our customers' expectations and requirements | Strategic partnerships for our segment leading green service offerings Development of solutions serving customer expectations and requirements |
| Tender processes and contract renewals | Provide green and sustainable solutions to assist decarbonization of their supply chains | Longer contracts with customers sharing our business philosophy | |
| Sanctions screening | Risk management, reputational protection and ensure compliance with laws and regualtions | Business relationships with responsible counterparties Informed selection of customers |
|
| Customer's ESG questionnaires | Understand our customers' expectations and requirements | Updated policies and procedures | |
| Suppliers | Discussions through day-to-day operations | Understanding our suppliers sustainability impacts | Sustainable sourcing of goods and services |
| Supplier questionnaires and on-site due diligence assessments | Ensure compliance with our code code of conduct throughout our supply chain | ||
| Sanctions screening | Risk management, reputational protection and ensure compliance with laws and regualtions | Informed selection of suppliers | |
| Workplace | |||
| Employees | Active engagement through the working environment committee (AMU) and communication through internal channels | Understand employees expectations and requirements | Action plans, improved working environment and updated internal policies adn procedures |
| Yearly engagement surveys | Detect improvement areas | ||
| Traning and upskilling | Provide our employees with necessary knowledge and understanding | ||
| Financial community | |||
| Investors, analysts, banks, insurance | Regular investor updates | Build credibility and showcase our strategy and performance | Improved sustainability communication in all sources |
| Annual and interim reporting | Keep new and existing investors updated on performance and plans | ||
| Investor meetings, presentations and roadshows | Understand expectations and requirements | A robust strategy to meet investors expectations |
|
| ESG ratings | Promote transparency towards external stakeholders | Gap analysis and plans to improve current ESG ratings | |
| Society | |||
| Governments, regulators and International policy makers | Dialouge with governments and policy makers | Identify and address climate-related transition risks and opportunities | Set our decarbonisation strategy and plans on the agenda |
| Regulatory tracking and analysis | Ensure compliance within operations and reporting | Resilient business model and strategy | |
| Media | Regular external communication in several channels | Inform and build trust among stakeholders | Good reputation among stakeholders |
| Industry and sustainability associations | Direct dialouge with industry and sustainability associations | Assist the industry to engage policymakers |
Planet
As a shipping company operating worldwide, we need to take responsibility for the environment we operate in. Our strategy is shaped to best meet our commitments and to assist decarbonising our customers supply-chains.
