Acting now.

Climate protection has become one of the most urgent issues of our time. ZF has adopted a correspondingly ambitious climate strategy, with the objective of achieving climate neutrality across all emission categories by 2040. Production-related emissions are to be reduced by 80% by 2030 as compared to 2019. In the year under review and in connection with the Sustainability Ambition Initiative, 2019 was agreed on as the base year to be used. At the same time, ZF is working on reducing the emissions along its entire supply chain and on minimizing the environmental impact of its products.

The Group’s target path towards climate neutrality is defined in accordance with the UN Sustainable Development Goals (SDGs), requirements of the Science Based Targets initiative (SBTi), the CDP (formerly the Carbon Disclosure Program) and the Taskforce on Climaterelated Financial Disclosures (TCFD). The SBTi validation of the ZF climate goals ensures that these are consistent and robust and comply with the Greenhouse Gas Protocol (GHG) and the targets of the Paris Agreement.

The entire industry still has a long way to go before fully rising to meet the many ecological and social challenges of sustainable development. The complexity of these challenges means they cannot be solved by individual companies but only through collaboration and partnerships. To underline its engagement in this field, ZF has joined the CEO Climate Leaders initiative of the World Economic Forum. Its position is that the private sector must take responsibility and actively engage in efforts to reduce greenhouse gas emissions, thereby helping to shape the global transition to a low-carbon, climate-resistant economy. The members of the Alliance of CEO Climate Leaders pledge to

• publish their emissions data, ideally via CDP;
• publicly lay down a net zero target for 2050 at the latest, which implies their commitment to a 1.5 to 2 degree Celcius compliant reduction path for all areas of the Greenhouse Gas Protocol (Scopes 1, 2, 3) including an emission reduction target for 2030 in line with this path, and

• report their progress in terms of emission reduction goals.

Beyond this, the Alliance is implementing the TCFD recommendations regarding disclosing climate related data and ensuring that the guidelines for effective controlling climate risks are implemented and monitored by the company management.

At ZF, questions of sustainable governance are firmly anchored in the company guidelines. More than just part of every individual’s behavior, they’re a central aspect of all business activities in every day’s decision processes. Yet sustainability can-not simply be dictated from the top down – it must be filled with life throughout the entire organization. EHS management as a longstanding globally established approach has served ZF as its basis for this and has been implemented at all ZF locations.

Guidelines such as the principles of social responsibility, environmental policy, respect for human rights policy statement and the code of conduct for employees serve as guardrails worldwide. Step by step over the past two years, the Group has further developed its ZF Enterprise Risk Management. This included defining and regulating clear roles and responsibilities along with Group-wide standardized risk management processes. A further significant addition to the reviewed Enterprise Risk Management (ERM) is an integrated governance, risk management and compliance (GRC) approach, characterized by improved interfaces between control systems, compliance, corporate audit and corporate risk management. As part of the Group’s ISO 14001 certified environmental management system, the respective risks and opportunities are evaluated at both the location and the Group level and reported as part of the management review.

The Sustainability Department reports to the Sustainability, Environment, Health and Safety Function which is assigned to the Board Function Human Resources, Legal and Compliance. In the year under review, the implementation of a multi-level sustainability organization was continued across all divisions, regions and major global domain functions. The Sustainability Department is responsible for the development of the Group-wide sustainability strategy and for non-financial reporting. It represents the contact point for all questions about sustainability and steers the stakeholder dialogue. In addition, the department is also responsible for individual topics, such as the climate strategy or human rights due diligence. In the coordination of sustainability topics in the company, the Sustainability Department is supported by a cross-functional steering committee.

With its Next Generation Mobility strategy, ZF pursues a global approach to achieve cleaner mobility. ZF’s medium-term goal is to significantly lower mobilityrelated carbon emissions and specific product-related emissions. The specific target defined in this connection is to implement a 40% reduction of Scope 3 emissions (in CO2 equivalents per sales) by 2030 compared to 2019.

Both the Product Development / Engineering and the Purchasing / Supply Chain departments are jointly responsible for this product-related goal. Key performance indicators (KPIs) include:

• Product-related CO2e reduction
• Product carbon footprints

In this connection, ZF focuses on the following three key areas:

• Reduction of resource consumption by focusing on process efficiency at suppliers and ZF-owned companies
• Increased use of recycled materials
• Expansion of ZF’s range of remanufactured products

One focus for reducing product-related emissions is the increased use of materials with a higher recycling material share. To contribute to a circular economy and achieve the long-term goal of climate-neutral products, ZF analyzed all material classes with regard to overall volumes and the corresponding share of recycled materials in 2021. Based on this analysis, technological measures were developed to increase the share of recycled materials. Their applicability to ZF products was then evaluated. As a result, ZF now has an action roadmap for materials that also indicates the corresponding profit relevance.

Furthermore, ZF participates in various projects aimed at promoting the circular economy. Among other activities, studies on the impact of the use of polymer recyclates on the performance of oil pans were carried out. The promising results led to the launch of an extensive basic development project in 2021 aimed at investigating the usability of a wide range of polymers from various recycling routes for ZF products. This study focuses on both materials from in-house production, such as production scrap, and post-consumer materials. Further increasing recyclate content in metal alloys was the focus of another extensive development project launched at the end of 2021. Both projects require the use of large capacities and intensive cooperation with the suppliers and will have a minimum term of two years.