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  • IRO-1 – Description of the process to identify and assess material impacts, risks and opportunities

IRO-1 – Description of the process to identify and assess material impacts, risks and opportunities

The Enea Group identified material impacts, risks and opportunities as part of the Double Materiality Analysis which was first conducted in 2024. The analysis covered two dimensions: the impact of organizations on sustainability matters and the impact of sustainability on financial performance (i.e., financial materiality). As a result, the Group determined which of the disclosure requirements contained in the European Sustainable Reporting Standards (ESRS) are relevant and mandatory for it.

The Double Materiality Analysis consisted of six steps:

  1. internal and external analysis;
  2. identification of impacts, risks and opportunities related to sustainability;
  3. taking stakeholders’ opinions into account;
  4. assessment of impacts, risks and opportunities;
  5. determination of the threshold of materiality;
  6. validation of results.

To develop a list of potential impacts, the Group analyzed its operations and business relationships. The Group operates in Poland, but some of the suppliers come from other regions of Europe and the world. The external analysis considered relevant industry-specific issues (based on a benchmark of competitors and industry reports) and compliance with industry standards as a benchmark for industry best practices. The internal analysis focused on reviewing documents such as the Group’s policies, strategies and environmental reports. In addition, press reports about the Enea Group were analyzed, which allowed for a better understanding of the external point of view.

Based on the ESRS IRO-1 guidelines, the so-called long list of impacts, risks and opportunities for the Enea Group were identified. A list of potentially relevant impacts was drawn up based on the ESRS 1 sustainability matters and the results of external and internal analyses. The list of risks and opportunities was developed based on the list of impacts, and also includes risks and opportunities that do not result directly from the Group’s impacts.

The following methods and assumptions were used in the identification process:

  • Greenhouse gas emissions were taken into account for the climate-related impacts, risks and opportunities. The Enea Group owns two power plants in Kozienice and Połaniec, CHP plants in Białystok and Piła, and heat plants in Białystok, Piła and Oborniki. In 2024, the emission factor of energy generation was 776 kg CO2/MWh; full data on total GHG emissions is presented in the section devoted to indicator E1-6 of this Report. The current activity of the Group and the Development Strategy were also analyzed to identify the current and potential future sources of emissions and climate-related impacts. A detailed analysis of climate-related risks is presented below in Climate-related risks and opportunities.
  • The SASB standards for the energy sector were used to identify the impacts, risks and opportunities related to pollution. The operations carried at each of the Group’s locations were analyzed considering pollution emissions into air, soil and water, as well as the use of substances of concern or substances of very high concern; and taking into account the activities of the Group’s key suppliers. The impacts, risks and opportunities related to pollution were determined based on scientific articles on the mining and combustion of hard coal and the companies’ environmental reports. As a next step, they were assessed taking into account their severity and probability. No consultations were carried out with the affected communities.The issues related to the pollution of air are material for: Enea Wytwarzanie, Enea Elektrownia Połaniec, Enea Ciepło, MEC Piła, PEC Oborniki and LW Bogdanka. Pollution of water is material for: Enea Wytwarzanie, Enea Elektrownia Połaniec, Enea Nowa Energia and LW Bogdanka. Substances of concern or substances of very high concern are material for: Enea Wytwarzanie, Enea Elektrownia Połaniec, Enea Ciepło, Enea Nowa Energia, Enea Oświetlenie, Enea Serwis, LW Bogdanka.
  • When identifying the impacts, risks and opportunities related to water, all of the Enea Group’s own locations were considered, taking into account, among others, the purpose of the use of water. From the perspective of water resources, the key locations are those related to electricity production, i.e. Enea Wytwarzanie, Enea Elektrownia Połaniec, Enea Nowa Energia, and coal mining at LW Bogdanka. Data from the Institute of Meteorology and Water Management, scientific articles, and information on water consumption from the Enea Group were used. The impacts related to water consumption in the Group’s value chain were also analyzed, using information on technological processes related to coal mining and the production of power machinery and equipment, among others, to analyze these impacts. No consultations were carried out with the affected communities. Water is a material topic for the Enea Group’s activities related to coal mining and electricity generation at conventional power plants (in Kozienice and Połaniec) and hydroelectric power plants. Additionally, the use of water in the Group’s supply chain is also a material topic (this includes Poland, Europe, Asia). The Enea Group does not use goods that are material in terms of the good condition or protection of marine water or aquatic resources.
  • When identifying the impacts, risks and opportunities related to biodiversity and ecosystems, all of Enea Group’s own locations were taken into account, in particular those located near protected areas, as well as upstream and downstream value chains. Based on reports and scientific articles concerning the impact of coal mining and energy production and distribution on biodiversity, the negative impacts of the Enea Group on biodiversity and ecosystems were identified, but no material risks, opportunities and dependencies related to biodiversity and ecosystems were identified. When assessing the impacts, risks and opportunities, the strength of the impact on biodiversity and ecosystems was evaluated, in particular the impact on the number of species and the geographical extent of this impact. Potential disruptions to ecosystem services, systemic risks and biodiversity-related physical and transition risks were also taken into account. The analysis took into account that the Group companies are planting new trees in accordance with the environmental decisions received. No scenario analysis regarding biodiversity and ecosystems was conducted, and no consultation with affected communities was carried out. The Enea Group has facilities located near biodiversity sensitive areas For detailed information regarding location and impact on ecosystems, see the chapter Environmental Disclosures in the section concerning Biodiversity and Ecosystems.
  • When identifying impacts, risks and opportunities related to circular economy, the resources used and all types of operations conducted by Enea Group were taken into account. Both resource inflows, including the types of fuel used to produce electricity and heat, machinery and equipment used in the Group, and resource outflows, i.e. products sold, were taken into account. The activities of the Group that contribute to circular economy were taken into consideration. The types of waste were also analyzed, taking into account information from the Product and Packaging Database. No consultations were carried out with the affected communities.Enea Group companies with material impacts, risks and opportunities related to the use of resources and generation of waste include: Enea Wytwarzanie, Enea Elektrownia Połaniec, Enea Ciepło, MEC Piła, PEC Oborniki and LW Bogdanka. Material resources used in the Group include: hard coal, biomass, equipment and materials used for coal mining. Maintaining the current operations would require the Group to continue the use of non-renewable resources and generate significant amounts of waste. It also involves risks associated with the volatility of raw material prices and the use of technologies that will be phased out due to climate change regulations. Material opportunities offered by circular economy include the sale of combustion by-products that can be used among others in construction. No significant impacts and risks associated with the transition to a circular economy have been identified. The use of resources is concentrated upstream in the value chain, in the extraction of raw materials and the production of machinery and equipment.
  • To identify the impacts, risks and opportunities associated with its business conduct, the Enea Group analyzed all its activities in the energy sector in Poland and its relationships with suppliers. The criteria applied in the process took into account the specific nature of the Group’s operations and applicable law. Information on the structure of transactions carried out by the Enea Group was also taken into account.

The opinions of internal stakeholders, i.e. the Enea Group workers, were also taken into account in the process of identifying the impacts. During the meetings, they discussed the impact of the Group’s companies on the environment and society.

Stakeholders were also involved in assessing the organization’s impact in a survey conducted separately among employees and external stakeholders1 when drafting the during the Double Materiality Analysis. Those polled rated the materiality of individual issues in the E, S and G areas on a five-point scale. The respondents also had the opportunity to indicate additional impacts that could be important from the Enea Group’s point of view. 595 people responded, of which 519 employees In line with the methodology adopted by the Enea Group, the stakeholders’ assessment accounted for 20% of the final materiality of impact.

¹ The form for employees included working conditions; the other questions were uniform for internal and external stakeholders.

The materiality analysis at Enea Group included a comprehensive examination of the organization’s impact on sustainability matters. The identification and assessment covered the following:

  • type of impact (positive/negative and actual/potential),
  • time horizons (short-term, long-term),
  • the scale and scope of the impact (for each impact, a rating between 1 and 5, where 1 is the smallest scale/scope and 5 is the largest),
  • reversibility of impact (for all negative impacts, a rating between 1 and 5, where 1 is an impact that does not require reversal and 5 is an impact that is impossible to reverse),
  • probability of impact occurrence (for all potential impacts, a rating between 1 and 5, where 1 is the least chance of materialization and 5 is a certain event).

A weighted average was used to assess the impact, with greater weight being given to severity2 rather than probability. In addition, for some impacts, the disaggregation by subsidiary as referred to in ESRS 1 Section 3.7 para. 55, Section 7.6 para. 104 and Article 63x. para. 8. Act of 6 December 2024 amending the Accounting Act, the Act on Statutory Auditors, Audit Firms and Public Supervision and certain other acts.

All impacts identified were evaluated and categorized by priority. Based on qualitative criteria, ratings from 1 to 5 were given for each criterion for each impact. The final score for the impacts included the expert assessment (80%) and the stakeholder assessment (20%). If a specific impact was not evaluated by stakeholders, 100% of the expert assessment was adopted.

The assessment of impact materiality was taken as the basis for financial materiality analysis. Most risks and opportunities are directly related to the impacts identified. The Enea Group used its ERM Methodology to assess whether the impacts identified would entail risks and opportunities. The assessment also covered the risks and opportunities that may arise from dependence on natural and human resources and the risks disclosed in previous ESG reports.

Risks and opportunities were rated according to their probability (on a scale of 1 to 4) and potential financial impact (on a scale of 1 to 4). The potential financial impact was quantified or qualified depending on the data available. The final score was obtained by multiplying these two values. In addition, a time horizon is specified for each risk and opportunity, either short-term (up to one year) or long-term (more than one year).

2 The severity of impact is determined by the scale, scope and reversibility for negative impacts or the scale and scope for positive impacts. The severity was considered to be a parameter with greater weight because of its lower arbitrariness and error of measurement.

The final results for the impacts ranged from 2.22 to 4.63. The Enea Group has adopted the following materiality thresholds:

  • Low materiality: 0-3.0>
  • Medium materiality – 3.0-3.5>
  • High materiality: 3.5-4.0>
  • Very high materiality: – 4.0-5>

The materiality threshold was set at 3.5, i.e. in the middle of the range between the lowest and highest value. As a result, the Group identified 64 material impacts.

The threshold of materiality in financial assessment was adopted in accordance with the Enea Group ERM Methodology, risks and opportunities that received a score of at least 8 were considered key, risks and opportunities with a score above 12 were considered critical. In total, the Group identified 37 material risks and 13 material opportunities.

The results of the Double Materiality Analysis were validated, among others, in workshops with the participation of representatives of the Controlling Department, the Strategy and Development Management Department, the Compliance Office, the Human Resources Management Department, the Risk Management Department, the Finance Department, Risk Managers in the companies and the OHS officer. In September 2024, the results of the Double Materiality Analysis were approved by the Enea Group Management Board.

Since then, the Group’s risk management system includes the climate-related risks. Other sustainability-related risks identified in the Double Materiality Analysis will be addressed in the future.

The Enea Group will monitor its potential and actual impacts on people and the environment as well as the risks and opportunities related to sustainability, among other things, by annually reviewing and, if necessary, updating the Double Materiality Analysis.

Climate-related risks and opportunities

The key element of the Group’s strategy is effective management of climate-related risks and opportunities with a view to allowing early identification of potential threats and taking advantage of opportunities related to the energy transition. As a result, the Enea Group is able to proactively respond to changes and properly manage the areas of its operations exposed to climate change.

In the process of managing climate risks and opportunities at the Enea Group, an approach consistent with the overall risk management process at the Enea Group has been adopted, which ensures the integrity and effectiveness of actions taken in the organization. Accordingly, the process is divided into 4 main stages in line with the ERM process:

  1. Identification of climate-related risks and opportunities
  2. Description and assessment of climate-related risks and opportunities
  3. Formulating a strategy for dealing with climate-related risks and opportunities
  4. Monitoring and reporting of climate-related risks and opportunities

In 2024, two of the four steps mentioned above (identification, description and assessment of climate-related risks) were carried out. As a result, a list of material climate-related risks and opportunities was created, which will be subject to further work in the process. The other two steps will be put into effect in 2025 based on standardized methodological assumptions that will be described in the Enea Group Risk Management Methodology. The identification and assessment of climate-related risks and opportunities carried out in 2024 covered the key companies of the Enea Group: Enea, Enea Wytwarzanie, Enea Operator, Enea Trading, Enea Elektrownia Połaniec, Enea Ciepło, Enea Nowa Energia, Enea Elkogaz, Enea Power&Gas Trading, Enea Eko, Miejska Energetyka Cieplna Piła with the exception of Lubelski Węgiel Bogdanka, which had not completed this stage of the process as of the end of the financial year and will continue it in 2025.  The figure below shows the desired process for managing climate-related risks and opportunities.

The identification of climate-related risks and opportunities in the Enea Group covered three key areas:

    Physical risks
    Climate-related opportunities.
    Transition risks

Physical risks refer to the impact of extreme weather events and long-term climate change on our infrastructure and operations. Transition risks relate to the challenges of adapting to regulatory, technological and market changes resulting from the global energy transition. The opportunities related to climate change, on the other hand, include the possibility of investing in renewable technologies, improving energy efficiency, and developing new products and services as well as markets that support a sustainable future. The scope of identification carried out in the Enea Group is presented below.

The approach adopted in the Group to identify climate-related risks and opportunities is based on a wide range of source data, such as the results of the Double Materiality Analysis, the Group Risk Log, as well as market sources and independent scientific and analytical studies.

The next stage – assessment of climate-related risks and opportunities – is divided into three parallel streams dedicated to individual types of analyzed issues (physical risks, transition risks, climate-related opportunities).

As part of the physical risk assessment, all assets and processes of the Enea Group’s key companies that may be exposed to sudden or long-term risks resulting from climate change, as defined in Commission Regulation (EU) 2021/2139 of 4 June 2021, were analyzed.

A semi-quantitative approach was used to analyze physical risks. The probability estimation is carried out by the companies being owners of an asset or process exposed to risk and is based on a 4-level risk and opportunity assessment scale applied in the Enea Group, as shown in the figure below. The probability level determined by the companies is then verified using extensive queries and tools based on climate models.

Estimation of effects of materialization of a given risk is performed by the Group companies, that are the owners of a given asset or process at risk, by determining the lower and upper limits of potential damage to property and lost profits resulting from materialization of such risk. When analyzing the financial effects, the following is taken into account in particular:

  1. Reduced income due to reduced production capacity (e.g. transportation difficulties, supply chain interruptions) or lower sales/efficiency.
  2. Higher costs resulting from negative impact on workers (e.g. health, safety, absenteeism) and reduced revenue.
  3. Write-offs and early decommissioning of assets (e.g. damage to property and assets in ‘high-risk’ locations).
  4. Increased operating costs (e.g. insufficient water supply for hydroelectric power plants or for cooling nuclear power plants and fossil fuel power plants).
  5. Increased investment costs (e.g. damage to facilities).
  6. Higher insurance premiums and potentially reduced availability of asset insurance in ‘high-risk’ locations.

The final result of the assessment of physical risks is a matrix showing the risks together with their final assessment calculated as the product of probability and separately the upper and lower limits of estimated loss.

The assessment of transition risks used a qualitative approach based on the Enea Group’s 4-level risk and opportunity assessment scale shown in the figure above, taking into account three time horizons (similar to physical risks) as well as a scenario of high transition risks, i.e. an ambitious decarbonization as defined in the National Energy and Climate Plan.

In our assessment of climate-related opportunities, we have followed the guidelines of the TCFD (Task Force on Climate-Related Financial Disclosures) and applied a qualitative approach based on the Enea Group’s 4-level risk and opportunity assessment scale as shown in the figure above. In this approach, we have taken into account three time horizons (similar to physical risks) as well as the SSP1-RCP2.6, i.e. a sustainable development scenario assuming an average temperature increase by less than 2°C by 2100 compared to the pre-industrial era, developed by the Intergovernmental Team on Climate Change (IPCC).

Risks and opportunities that are considered key or critical in the assessment will be subject to periodic monitoring and reporting in accordance with the Enea Group’s risk and opportunity assessment scale. The ultimate scope of monitoring and the structure as well as the frequency of reporting on the status of identified climate-related risks and opportunities will be developed and implemented in 2025. However, it is assumed that the entire Climate-Related Risk and Opportunity Management process in the Enea Group should not exceed a period of one year.

The list of climate-related risks can be found in the chapter Environmental Disclosures in the section concerning Climate Change, while the list of climate-related opportunities has been included in a table in section SBM-3 of this chapter.

¹ Na dotkliwość wpływu składają się skala, zakres i odwracalność w przypadku wpływów negatywnych lub skala i zakres w przypadku wpływów pozytywnych. Ze względu na niższą uznaniowość i mniejszy błąd pomiaru, dotkliwość uznano za parametr o wyższej wadze.

Description of the process for climate-related physical risk

The Enea Group has carried out the identification and assessment of climate-related physical risks in the areas of activity that have a significant impact on the financial performance, i.e. in Enea Nowa Energia, Enea Ciepło, Enea Elektrownia Połaniec, Enea Wytwarzanie, Miejska Elektrociepłownia Piła, Enea Operator. Moreover, Enea SA, Enea Serwis, Lubelski Węgiel Bogdanka and Enea Elkogaz carried out an assessment of climate-related physical risks for the operations that were verified for aligment with the EU taxonomy.

The climate-related risks were identified and analyzed for the following time horizons:

    1 year
    short term:
    5 years
    medium term:
    15 years
    long term:

The time horizons were determined on the basis of regulatory requirements (short and medium term time horizons). The long term time horizon was set at 15 years to capture the first years of potentially extreme climate changes in Europe and to maintain consistency between the time horizon for analyzing physical risks and the time horizon adopted for analyzing transition risks in the update of the National Plan for Energy and Climate, which uses a time horizon up to 2040.

Climate-related hazards were identified by determining the exposure, sensitivity, and vulnerability of assets and processes at the locations where the Companies conduct business and in value chains to 28 climate risks identified in ESRS E1. The locations were described using address data and geospatial coordinates of the places where the Companies conduct their operations and where material parts of their supply chains are located. The verification and assessment of exposure of assets and economic activities was based on the collection of quantitative and qualitative data on the materialization of climate-related physical risks in the history of each Company, identification of the assets’ sensitivity threshold to material risks, the quantitative and qualitative description of the potential impact of the risks, and the identification of control measures that reduce the exposure to significant climate-related physical risks.

After developing a list of risks relevant to the companies’ operations, the companies collected data on the potential ranges of financial losses to property and the potential ranges of losses due to business interruption, loss of productivity, and loss of profits in the event of materialization of relevant climate-related hazards at various levels.

The next step in the analysis was to extract information from climate models to assess the likelihood of relevant risks materializing in the locations analyzed. Based on the thresholds of sensitivity to threats and on climate models, we determined the estimated probability of relevant threats in each location The analysis was conducted under the conditions of the SSP5-8.5 climate change scenario, which was selected to meet regulatory expectations, i.e. to consider a climate scenario involving high emissions, for example, based on scientific findings from the Intergovernmental Panel on Climate Change (IPCC) reports: SSP5-8.5. Such a conservative approach allowed the analysis of the most adverse potential impacts, assuming extreme conditions.  The assumptions used in the analyses remain consistent with the state of scientific knowledge as summarized in the IPCC scenario SSP5-8.5. This scenario assumes high economic growth based on intensive use of fossil fuels, the absence of effective climate policies and negligible action to reduce greenhouse gas emissions, resulting in an average temperature increase of >4°C in 2100 compared to pre-industrial times. As a result of such a large increase in average temperatures, the risk of catastrophic climate and weather events is expected to be high in the long term, while the transition risks are relatively low in the short and medium term. Information on the magnitude of climate-related risks to the Enea Group in the three relevant time horizons was obtained from publicly available tools based on the results of modeling of the Earth’s climate system and downscaled to the locations where the companies operate. As recommended by the academic community, the results of the models were further verified by experts and adapted to the specific context based on historical data and the technical expertise of the Companies’ employees.

At the end of the process, the climate-related physical risks were assessed using the Enea Group’s risk assessment methodology, which is based on the potential financial impact and the probability of materialization of the threat obtained for each location.

The list of climate-related risks can be found in the chapter Environmental Disclosures in the section concerning Climate Change, while the list of climate-related opportunities has been included in a table in section SBM-3 of this chapter.

Description of the process in reference to transition risk and climate-related opportunities

The Enea Group has conducted the identification and assessment of climate-related transition risks and opportunities. Based on information on sensitivity thresholds, the Group assessed the extent to which assets, areas of activity, own operations and the value chain may be sensitive to transition events and which of them have a significant impact on the financial performance of the Enea Group. The process consisted of identifying significant events related to low-carbon transition, for which the starting point was the table in ESRS 2 IRO-1 AR 12. The next step was to collect financial data on the estimated potential financial impact of these events, should they occur. Based on the descriptions of possible scenarios, the Group determined the approximate probability of the analyzed events in the ambitious decarbonization scenario. The climate-related transition risks were then assessed using Enea Group’s risk assessment methodology. The process involved active participation of representatives from each business area, which ensured that the specifics of the Group’s operations were fully taken into account. The verification and assessment of sensitivity of assets and economic activities was based on the collection of quantitative and qualitative data on the materialization of climate-related transition risks, including an assessment of the potential financial impact, and the identification of control measures that reduce the exposure to significant climate-related transition risks.

The Enea Group, as part of its internal climate risk analysis process, has identified events related to the transition to a low-carbon economy.

This process took into account three time horizons:

    1 year
    short term:
    5 years
    medium term:
    15 years
    long term:

The methodology used was based on the results of a double materiality analysis, the Enea Group’s risk register, as well as academic studies, publicly available industry reports and national strategic documents such as the National Energy and Climate Plan (NECP). The identification of transition events and the assessment of risk sensitivities were carried out based on an ambitious decarbonization scenario that aims to limit the global average temperature increase to 1.5°C in 2100 compared to pre-industrial times. In the case of the scenario analysis conducted by the Enea Group, the main scenario used to estimate transition risks was the 2024 update of the NECP and the associated With Additional Measures (WAM) transition scenario. The WAM scenario envisages the implementation of new climate and energy policy instruments, focusing on accelerating decarbonization in a way that strengthens the national economy. The implementation of this scenario could lead to a 50.4% reduction in GHG emissions by 2030 compared to 1990 levels, which is an ambitious goal for a country that remains one of the most coal-dependent in the world (the EU target is 55%). This scenario is designed to show the potential for emission reductions in different sectors of the economy through the use of new technologies, legislative solutions and additional investments. Looking ahead to 2040, Poland is able to significantly accelerate the transition process, considerably improve key economic and climate indicators, and significantly reduce energy production costs.

This scenario was chosen to analyze the most negative potential impacts of transitioning to a low-carbon economy. In a scenario of this type, transition events cause relatively high transition risks. The assumptions are consistent with the state of scientific knowledge, including IPCC reports and especially SSP-1, which is based on sustainable development, a low-carbon economy and increased environmental awareness.

In the process of identifying material transition risks, the Enea Group has analyzed its assets and economic activities in the context of their consistency with the goals of a climate neutral economy. This process included the classification of transition events, with a particular focus on changes in the regulatory, market and technological environment, as well as key factors for maintaining the Group’s business continuity. The Enea Group is taking active steps to strategically adapt its business model, focusing on operational and technology transition. The aim of these activities is to ensure market competitiveness in the long term and to minimize risks associated with the decarbonization process and with the evolution of the energy sector.

The list of climate-related risks can be found in the chapter Environmental Disclosures in the section concerning Climate Change, while the list of climate-related opportunities has been included in a table in section SBM-3 of this chapter.

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