Accelerating towards a low-carbon future

We will enable the transition to a low carbon economy. We will be Climate Positive, working closely with our customers to develop products that offer carbon saving benefits in use.

Our ingredients offer many sustainability benefits in use, including helping our customers and their consumers to reduce or avoid greenhouse gas emissions. Our Carbon Cover target means that by 2030 the use of our products will avoid four times the carbon emissions associated with our business.

At the end of 2022, our carbon cover ratio was 0.66:1 – the ratio of avoided emissions through the use of our ingredients to our scope 1, 2 and upstream scope 3 emissions. This target has been affected by the divestment of our PTIC businesses, as several of our initiatives sat within that part of the business. However, our level of ambition remains unchanged. In the last year, we received validation for three new case studies, including a new product in Home Care, CroBiotic 100.

Downstream GHG emissions

Our carbon cover target aims to support customers in avoiding downstream emissions. The concept of avoided emissions is defined by the GHG Protocol as “emission reductions which occur outside of a product's lifecycle or value chain, but as a result of the use of the product” and often referred to as scope 4. Avoided emissions will be an important part of the net zero transition.

We have started thinking beyond our existing avoided emissions case studies to consider remaining downstream scope 3 emissions associated with the use of our ingredients and how further savings can be made. In better understanding and quantifying emissions in the three downstream scope 3 categories, we will collaborate with customers to identify innovative ways to reduce our shared downstream scope 3 emissions from today’s baseline.

For example, through:
• Consumer education and engagement to reduce energy consumption in use
• Supplying our ingredient in an alternative form, reducing customer processing emissions
• New product development to satisfy an unmet need, reducing use-phase emissions

Measuring the emissions associated with the end-of-life of used products will allow us to quantify, and our customers to realise, the benefits of our move to bio-based ingredients, avoiding the release of additional fossil carbon into the atmosphere. Our thinking in this area continues to develop, and we will look to align with guidance from the WBCSD on avoided emissions, due for release in early 2023.

We will achieve our Science Based Targets (SBTs) by reducing our emissions in line with limiting the global temperature rise to 1.5ºC above pre-industrial levels, maximising the use of renewable energy in our operations.

Tackling the climate emergency is a global challenge and a priority for Croda.

By decarbonising our operations and supply chain, applying innovation, and delivering sustainable ingredients that provide benefits in use, we are also supporting our customers’ decarbonisation ambitions. Our leadership position means we can be a vocal advocate for the transition to net zero across our industry and beyond. Our leadership surrounding climate-related risks and opportunities was recognised by CDP as we scored A- in our 2022 climate disclosure. At the end of 2022, we are on track to achieve our 1.5ºC SBT, with a reduction in scope 1 and 2 emissions of 19.8% since our baseline year of 2018.

Validation of our decarbonisation roadmaps

We reached a significant milestone in 2022 with every Croda location, including non-manufacturing sites, completing decarbonisation roadmaps demonstrating how they can achieve a 50% reduction in scope 1 and 2 emissions by the end of 2029.

Internal carbon price

Since 2020, we have applied an internal shadow carbon price to capex projects to help prioritise projects that will reduce scope 1 and 2 emissions, reducing their pay back periods. In 2022 we increased this price from £55 per tonne to £124 per tonne, in line with the UK Government’s Green Book, highlighting the increasing importance of climate action to avoid exposure to the cost of carbon and the importance we place on ensuring business growth without increasing GHG emissions, through zero scope 1 and 2 emission capacity and capability investments wherever possible.

Climate leadership: Product Carbon Footprint data

2022 has seen Croda working to automate the calculation of PCF data for all products from our top 13 manufacturing sites. This requires using activity-based costing data from our sites and includes the emissions associated with raw materials to calculate a cradle-to-gate footprint per product. The data has two main purposes:

• Internally, it will enable the sectors to make portfolio management decisions with carbon footprint as a datapoint, and will inform the next generation of low carbon products. The sector teams will be finalising 2030 decarbonisation roadmaps during 2023, going beyond the actions already being implemented at our manufacturing sites to include scope 3, and this information will be an invaluable part of that process.
• Externally, this data will be important for customers as they calculate and aim to reduce the scope 3 emissions associated with their raw material purchases. We will be able to provide a number that can demonstrate reductions since 2018, our baseline year, and show future reductions to support our customers’ supply chain SBTs.

Employee engagement

Seventy-two low carbon sites make up 4% of our scope 1 and 2 emissions but employ 2,652 people, so taking visible actions at these sites is important to engage all employees in our decarbonisation journey. The main actions required, common across all non-manufacturing locations, are electrification of the company car fleet, and the move to renewable electricity. Global guidance has been issued to the regions to support company car policies. In working to develop these roadmaps and by taking action, several sites will achieve carbon neutrality (zero scope 1 and 2 emissions) in 2023.

Scope 3 emissions

Having developed an industry leading granular scope 3 inventory in 2021, our focus during 2022 was on increasing the visibility of this data across the organisation to help inform decision-making, including for the development of sector decarbonisation roadmaps. We have developed a corporate scope 3 dashboard for quarterly reporting across the business, showing our upstream scope 3 categories. Our sustainable procurement team have developed a roadmap to achieve our scope 3 SBT. We have taken a layered approach, starting with supplier engagement and a supply chain review, with long-term greater impacts to be achieved through innovation and portfolio management led by the sectors, understanding that gathering primary data on carbon emissions attached to sourcing our raw materials is critical for quantifying the benefit of decarbonisation activities within our supply chain .

We will accelerate the transition to bio-based products, moving away from fossil/petrochemical feedstocks.

We have set an ambitious target for 75% of our organic raw materials to be bio-based by 2030. This transition away from petrochemical feedstocks through sustainable innovation has a positive climate impact, avoiding the release of additional fossil carbon into the atmosphere at the end of life of our ingredients. Our sustainable innovation strategy spans the transformational development of existing technologies and the discovery of alternative new solutions.

In the design phase of new product development, our research teams are working with supply chain experts, internally aiming to maximise the bio-based content of new developments well ahead of our portfolio target. At the end of 2022, 59.4% of our organic raw materials were bio-based. The divestment of our PTIC businesses did have an impact on progress but our target remains unchanged, and we are increasing our level of ambition.

In 2022 we committed to transitioning all ethylene oxide purchases to bio-based globally. Our transition to bio-based ethylene oxide (bio EO) is well developed in North America through the ECO range of 100% bio-surfactants. We are progressing well in Europe and Asia towards first bio EO usage in the coming year, with availability of bio EO increasing rapidly in several locations, catalysed by our public leadership position. In addition, where sources are less readily available, teams are investigating the use of ethylene oxide from recycled feedstocks, where upstream scope 3 carbon savings are possible.

Our sustainable innovation strategy also focuses on reducing the footprint of our ingredients during the full product life cycle by: increasing biodegradability; improving purity; and lowering the environmental footprint of products. This holistic approach ensures all aspects of a product’s life cycle are considered during the design phase. In the earlier discovery phase, new disruptive technology platforms and processes are being investigated to offer alternatives to some existing products, within a framework of safe and sustainable design.