04 Sustainability Statement Climate change (E1) CLIMATE CHANGE ADAPTATION Impacts, Risks and Opportunities (IROs) Brief description Upstream value chain Downstream value chain Own operations Short-term Medium-term Long-term E1 – CLIMATE CHANGE Climate change adaptation Impact of physical climate risks on business activities, assets, employees, raw materials, delays and logistics costs Michelin has operations around the world that could be impacted by the increased frequency of adverse climate events, such as storms, floods, droughts and other risks. In light of the diverse range of suppliers and the many interdependent factors necessarily involved in the manufacture of its products (infrastructure, energy, availability of labor, transportation systems, etc.), the effects of climate change may be qualified as systemic. Risk Introduction Climate change impacts are already visible and are expected to worsen over the medium term, according to the Intergovernmental Panel on Climate Change (IPCC). Michelin’s approach to managing these impacts is described in detail in Chapter 3 on risk management, above. These risks arise from the following aspects of the Group’s operations and value chain: n The Group’s business activities, assets and employees: Michelin has operations around the world, any of which could be considerably impacted by the increased frequency or intensity of heat waves, storms and hurricanes, floods, droughts and other natural disasters exacerbated by climate change. Failure to adapt to these conditions could result in business interruptions, property damage and risks to personal health and safety; n Raw materials: l climate change could increase the cost of extracting and producing raw materials and impact their availability, l production infrastructure may be damaged, which could lead to higher costs. Extreme weather events may also cause shortages of raw materials and increase their prices; n Natural rubber: Climate change is having a major impact on four climate parameters that play a key role in natural rubber production: average temperatures, cumulative rainfall, number of dry months and number of cold months. l a 2022 study commissioned by Michelin from Forest AI and the CIRAD (Cartographie des impacts du changement climatique sur le caoutchouc naturel) has identified a potentially major, industry-wide impact of global warming on natural rubber production, particularly over the 2050-2100 period. In the IPCC’s “middle-of-the-road” shared socioeconomic pathway (SSP2), this impact could reduce the yield potential in all the current producing regions by an average 5-20% and more so in the drier regions, l climate change is likely to increase the length of a rubber tree’s immature phase by impacting immature growth, as dry seasons are likely to be longer and/or more intense, l extreme droughts, heat waves and water shortages, as well as climate change-induced heavy rains and floods, will also tend to increase rubber tree mortality and reduce yields. In Thailand in 2024, for example, heavy rains caused crop losses, l changes in climate conditions could also have an impact on where certain pests and diseases could spread and affect production regions; n Delivery delays and logistics costs: l extreme weather conditions (heat waves) and water cycle disruptions (water stress) can damage transportation infrastructure and disrupt supply chains, resulting in delivery delays and higher logistics costs, with a potential impact on Michelin’s revenue, l in addition, Michelin’s value chain comprises a myriad of interdependent inputs required to manufacture and distribute its products (infrastructure, energy, labor, transportation systems, etc.). This complexity increases the severity of the risk as well as the number of single points of failure. Upstream Downstream OP OP 217 2024 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN
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