Climate Change Data

Environmental Metrics

ESG Focus Areas

• Climate change
• Product safety
• Occupational health and safety
• Responsible supply chain
• Diversity
• Ethical business conduct and compliance
• Innovation and technology
• Resilience
• Well-being at work

Environmental Achievements

• New manufacturing facility at Herøya with a potential annual CO2 reduction of 4-5 million tons for customers (10% of Norway's annual CO2 emissions).

Social Achievements

• Updated employee policies, implemented COVID-19 preventive measures, refined recruitment strategy.
• Increased number of women in workforce from 62 to 75 (15% to 19% from 2018 to 2020).

Governance Achievements

• Launched Nel Compliance System, established ESG Group, implemented a whistleblowing channel (Nel Ethics Hotline), completed and launched several key policies (ABAC Policy, Competition Law Policy, Code of Conduct).

Climate Goals & Targets

Environmental Challenges

• Supply chain disruptions
• Potential quality and safety issues
• Risk of corruption
• Uncertainty associated with the timing and pace of growth in the hydrogen industry
• Risk of technology obsolescence (Alkaline vs PEM vs future technologies like AEM and SOEL)
• Reputational risk

Mitigation Strategies

• Thorough supplier selection and follow-up program
• Implementation of an Enterprise Risk Management (ERM) system
• Stress-testing strategy against different scenarios
• Active IP protection strategy
• Continuous monitoring of technological developments
• Focus on maintaining a strong brand and transparent communication

Supply Chain Management

Supplier Audits: 10 key category suppliers in 2021

Responsible Procurement

• Pre-qualification process verifying QHSE systems and sustainability considerations
• Verification of supplier compliance with Nel’s Code of Conduct

Climate-Related Risks & Opportunities

Physical Risks

• Shortage of water and electricity impacting product performance

Transition Risks

• Geopolitical impact on climate policies
• Changes in the anticipated role of green hydrogen

Opportunities

• Attracting and retaining talent
• Access to green financing
• Decarbonizing various sectors
• Higher utilization of renewable energy output

Reporting Standards

Frameworks Used: GRI Standards: Core option, TCFD, Euronext ESG guidelines, UN Sustainable Development Goals

UN Sustainable Development Goals

• Goal 7 (Affordable and clean energy)
• Goal 13 (Climate action)

Nel provides clean energy alternatives and contributes to decarbonization.

Sustainable Products & Innovation

• Alkaline and PEM electrolysers
• Hydrogen fueling stations

Environmental Metrics

ESG Focus Areas

• Climate Change
• Organisation and occupational health and safety
• Product safety
• Responsible supply chain
• Cyber security
• Well-being at work
• Ethical business conduct and compliance
• Innovation and technology
• Resilience

Environmental Achievements

• Commenced production at its new manufacturing facility at Herøya in Norway, the world’s first fully automated electrolyser production facility, aiming for a 40% cost reduction as production volumes increase.
• Delivered the 4.5 MW alkaline electrolyser solution enabling fossil-free steel production in the HYBRIT project.

Social Achievements

• Established a company-wide safety program to foster a zero-tolerance attitude towards HSE incidents.
• Conducted 15 supplier audits in 2021, exceeding the target of 10 key supplier audits.
• Strengthened its focus on HR development at the overall corporate level.

Governance Achievements

• Completed and launched the Nel Anti-Bribery and Corruption Policy, the Nel Competition Law Policy, and the Nel Code of Conduct.
• Launched the Nel Data Protection Policy to ensure compliance with GDPR.
• Established a Nel Procurement Community to develop a robust supply chain across Nel.

Climate Goals & Targets

Environmental Challenges

• Global travel restrictions, supply chain disruptions, and the Covid-19 pandemic negatively impacted progress on customer/partner dialogue, order intake, supply chain costs and lead time, installation, commissioning, and production efficiency.
• Increased raw materials expenses related to a 35% increase in revenue from contracts with customers, negatively impacting margins.
• Ramp-up costs and lower margins in Norway and the US negatively impacted EBITDA.
• Intensifying competition as Nel and others ramp up production capacity.
• Disruptions in the value chain and travel restrictions due to the Covid-19 pandemic.
• Increased raw material costs putting pressure on margins.

Mitigation Strategies

• Expanded partnership network by entering framework agreements with Wood and Aibel.
• Investing in development of large-scale concepts and delivering 20 MW building blocks to 20, 200, 800 MW concepts and beyond.
• Strengthening its supplier base with new competitive suppliers.
• Implementing the Nel Business System (NBS) across Nel in 2022, focusing on customer satisfaction and prioritizing HSE, quality, and ethics.
• Continuing to develop the pre-qualification and supplier development program by establishing a supplier portal.

Supply Chain Management

Supplier Audits: 15 audits in 2021

Responsible Procurement

• Revised pre-qualification process for high-risk suppliers.
• Established a Nel Procurement Community to integrate a systematic ESG approach.

Climate-Related Risks & Opportunities

Physical Risks

• Shortage of water and electricity impacting products’ performance.

Transition Risks

• Higher price for renewable power negatively affecting demand for green hydrogen technologies.
• Technological change making green hydrogen less relevant.

Opportunities

• Significant opportunities to turn the existing hydrogen market green.
• Transforming the current diesel-based heavy-duty transportation to run on zero-emission green hydrogen.

Reporting Standards

Frameworks Used: GRI Sustainability Reporting Standards (Core option), TCFD, Euronext ESG Guidelines, UN Guiding Principles on Business and Human Rights, UN Global Compact, OECD’s Guidelines for Multinational Enterprises

UN Sustainable Development Goals

• Goal 7 (Affordable and clean energy)

Providing clean energy alternatives to a vast range of industries and applications, contributing to increasing the share of renewables in total energy consumption.

Sustainable Products & Innovation

• Alkaline and PEM electrolysers
• Hydrogen fueling stations

Environmental Metrics

ESG Focus Areas

• Climate change
• Product Safety
• Responsible Supply Chain
• Occupational Health and Safety
• Governance
• Innovation and R&D

Environmental Achievements

• Reduced GHG intensity (excluding scope 3) to 0.95 tCOe2/net revenue in NOK million from 1.64 in 2022
• Recycled non-hazardous waste at 48% (target >50%)
• Increased Overall equipment effectiveness (OEE) for Alkaline production to 67% (target ~78%) and PEM production to 91% (target ~90%)

Social Achievements

• Reduced employee turnover rate to 13.7% from 20%
• Implemented safety trainings for all employees, focusing on hydrogen risks
• Achieved zero fatality rate and reduced TRIF to 19.67 (target <10.2) and LTIF to 11.24 (target <5.2)

Governance Achievements

• Increased compliance training completion rate for employees to 94% (target 100%) and for executive management and Board of Directors to 93% (target 100%)
• Reduced number of reported concerns through the whistleblower channel to 7 from 15 in 2022
• Implemented a Supplier Declaration formalizing minimum requirements for human rights, business integrity, compliance, and health & safety

Climate Goals & Targets

Environmental Challenges

• Higher interest rates, tighter capital markets, and cost escalations slowed market momentum in the second half of 2023
• Project qualification and maturation became more challenging
• Execution challenges in industrialization of both Fueling and Electrolyser divisions
• High personnel and other operating costs due to investments in growth
• Significant inefficiencies and cost overruns in project execution
• Low order intake environment in Fueling division
• High quality costs negatively impacting gross margin in Fueling division
• Uncertainty associated with the timing and pace of growth in the hydrogen industry

Mitigation Strategies

• Implemented “Bigger Better Focused” strategy: increased production capacity, improved technology, and focused scope of supply
• Reduced the cost of electrolysers and enhanced energy efficiency
• Narrowed scope of supply in Electrolyser division, focusing on stacks and balance of stacks, and partnering with EPC companies
• Narrowed technology focus in Fueling division to high-capacity stations for heavy-duty vehicles
• Continued investments in growth and higher activity levels, adding experienced personnel
• Intensifying actions to improve performance and profitability of Fueling division
• Investing in R&D to advance hydrogen-fueled transportation
• Developing high-capacity fueling stations for heavy-duty transportation

Supply Chain Management

Supplier Audits: 23 audits in 2023 (target 30 in 2024)

Responsible Procurement

• Supply chain screening
• Integrity due diligence checks
• Supplier Declaration
• Supplier Audit Program
• Code of conduct
• Human rights policy

Climate-Related Risks & Opportunities

Physical Risks

• Increased requirements for product safety or water supply due to climate events
• Water scarcity on strategic markets
• Product safety incidents arising from climate acute events

Transition Risks

• Product failure and technology obsolescence
• Reduced or delayed support from governments
• Insufficient supply of critical minerals
• PFAS ban in the European Union

Opportunities

• Increased demand for renewable hydrogen solutions
• Opportunities to provide viable technology for hydrogen production with low carbon emissions

Reporting Standards

Frameworks Used: GRI Standards: Core option, TCFD, Euronext ESG Guidelines, UN Guiding Principles on Business and Human Rights, UN Global Compact, OECD Guidelines for Multinational Enterprises, CSRD (partially incorporated)

Certifications: ISO 9001, ISO 14001, ISO 45001

UN Sustainable Development Goals

• 7 (Affordable and clean energy)
• 8 (Decent work and economic growth)
• 9 (Industry, innovation and infrastructure)
• 13 (Climate action)

Nel's products and services contribute to clean energy production, job creation, infrastructure development, and climate change mitigation

Sustainable Products & Innovation

• Alkaline and PEM electrolysers
• Hydrogen fueling stations