Greenhouse gas (GHG) emissions & air quality

Reducing (GHG) emissions and other air pollutants is a key priority for Arxada in our effort to preserve our planet and limit climate change. While our products can have a positive impact, we look to decarbonize our facilities and across our supply chain. This aligns with our ambition to be a low-carbon chemicals company with a Net Zero carbon footprint.

In 2023, SBTi approved our emission reduction targets in line with a 1.5°C emissions reduction trajectory. This recognition solidifies Arxada's steadfast commitment to sustainability and its contribution to our industry's transition to cleaner, greener solutions. Our targets are:

Arxada's operational team is responsible for delivering our planet strategy. In our second full year as a company, we have already met our 2030 commitment, achieving a 58% reduction in our Scope 1 and 2 emissions relative to 2021.

In 2022, we announced a plan to revise our Scope 1 and 2 commitments in 2023. In recognition of the need to address our entire carbon footprint, we have shihed our decarbonization efforts to focus on our Scope 3 emissions. Going forward, we will remain vigilant on making continuous improvements to our operational efficiency and seeking opportunities to further decarbonize.

Our scope 1 and 2 emissions

In 2023, we completed a GHG inventory covering our Scope 1 emissions from our manufacturing processes and facilities, and our Scope 2 emissions from purchased electricity and steam. To meet net zero by 2050, we will be working to reduce our emissions in line with our approved SBTi targets.

We continue to seek opportunities for decarbonization across our facilities globally. One such project was the installation of a catalytic converter in 2021 in Visp, our largest production site. This installation led to significant reductions in nitrous oxide (N20), which represents a significant portion of our global Scope 1 emissions. To date, the converter has enabled us to reduce our N20 emissions from Visp by more than 500,000 tons of C02e per year, achieving a reduction of over 70% in our global Scope 1 emissions compared to 2021. The catalytic converter was a key driver in our ability to meet our Scope 1 and 2 target set in 2022, which in turn allowed us to achieve 58% reduction of our global Scope 1 and 2 emissions from our 2021 baseline. However, this achievement does not deter us from seeking to improve the efficiency of our operations and finding opportunities to further reduce our footprint, to achieve our net zero commitment.

Another priority is reducing our Scope 2 emissions from purchased steam and electricity used to run our daily operations. We continue to explore ways to increase our use of renewable energy and other low- carbon energy sources. We are also working to identify equipment replacements that are more energy efficient. The case study below highlights our refrigeration upgrade in Williamsport, Pennsylvania.

Our scope 3 emissions

In 2023, our Scope 3 emissions accounted for over 80% of our total GHG inventory. This notable shih in our emissions profile is due to two key factors. Firstly, we successfully enhanced our Scope 3 inventory for 2022 and 2023 by incorporating additional relevant downstream Scope 3 categories. This improvement marks a significant milestone in our commitment to comprehensive and accurate emissions tracking, showcasing our dedication to environmental responsibility and transparency. Secondly, as described in the “Our Scope 1 and 2 emissions” section above, we achieved a substantial reduction in our Scope 1 emissions compared to 2021, thanks to the installation of a catalytic converter in Visp. This advancement underscores our proactive approach to mitigating direct emissions and reflects our ongoing efforts to implement innovative solutions for a sustainable future.

Following the validation of our SBTi targets in 2023, we successfully set a Scope 3 emission reduction target. We commit to reducing absolute Scope 3 GHG emissions by 28% by 2030 relative to 2021. To support this, we are identifying raw materials with the most significant impact on our GHG intensity and seeking opportunities to reduce our consumption of these materials. We are also exploring the feasibility of recovering, recycling and reusing raw materials.

Along with the efforts to reduce our raw material consumption, we are working to further reduce our Scope 3 footprint by advancing responsible sourcing and waste management efforts throughout our value chain. We plan to engage in strategic partnerships with our suppliers and customers to drive our Scope 3 targets. Please see our Responsible Sourcing section for more details on how we evaluate our suppliers.

Arxada's Visp site, our largest production facility, operates on a highly efficient "Verbund" principle that integrates material and energy flows with multiple recycling processes. In 2023, our team investigated the potential for using biofuels from renewable feedstocks to feed the acetylene cracker on site. Innovations like these will further enable Visp to produce low-carbon, cost-competitive, chemical products and advance our Net Zero by 2050 commitment while better supporting our customers' sustainability efforts. In 2024, we will continue to make improvements in our plants as part of ongoing optimization projects. This will help us better understand our Scope 3 footprint and reduce our emissions, focusing on our raw materials. For further details, please read our case study below.

Scope 3 inventory ^[14]

	2021	2022	2023
Scope 3 inventory including downstream transportation emissions	1,725,106 tCO₂e	1,538,976 tCO₂e	1,465,020 tCO₂e
Improved Scope 3 inventory including additional downstream emissions		2,716,589 tCO₂e	2,633,184 tCO₂e

Air pollutants

In addition to GHG-related gases, we regularly monitor our emissions to air for concentrations of sulfur oxides (SOx), nitrogen oxides (NOx) and volatile organic compounds (VOCs) to mitigate emissions of dust and particulate matter.

We monitor these air pollutants in accordance with the timelines and procedures established by the relevant regulatory authorities. We employ various technologies, such as filters and capture systems, to minimize emissions into the atmosphere. In 2023, no violations of air emission regulations were recorded at our production plants.

Looking forward to 2024

The validation of our emission reduction targets by the Science Based Targets initiative in 2023 advances our ambitions to scale emissions reduction initiatives and identify additional opportunities to decrease our footprint. In 2024, we aim to establish the foundation of an integrated management system over multiple sites, to increase the overall efficiency of our operations and expand the use of renewable energy to minimize our environmental impact. Additionally, we will seek ways to electrify processes currently dependent on natural gas. Our focus will be on finding the most impacfful opportunities and working diligently toward achieving our goals.

Highlights

Achieving net-zero: leveraging biofuel in acetylene cracking at Visp for low-carbon chemical production

Our Visp manufacturing facility in Switzerland operates as a Verbund, which means the facility closely cooperates with its neighboring facilities from other companies to create operating efficiencies for one another. This includes value chain efficiencies such as interlinking energy flows and site infrastructures. Our Visp site has highly integrated material and energy flows, with several established recycling and recovery points shared by its neighboring facilities that make energy use more efficient across the site.

Visp is powered by an acetylene generating unit that relies on a partial oxidation process to achieve the high temperatures and contact times required for production. To improve our future sustainability performance, the Visp team conducted a feasibility study in 2023 and determined that biofuels from renewable feedstocks could be used to run the acetylene generating unit. This innovation will allow the Visp site to produce lower carbon, cost-competitive chemical products - and will have a direct impact on our ability to achieve our net-zero goal by 2050.

Furthermore, this innovation directly impacts the carbon footprint of our products, helping our customers meet their Scope 3 GHG emission reduction targets and other sustainability efforts.

Biofuels from renewable feedstocks have become increasingly popular in recent years as the aviation industry moves toward sustainable fuels. While the supply of these biofuels is limited today, we expect the market to grow rapidly in the coming years, making them an economically viable alternative.

Upgrading our refrigeration assets in Williamsport, Pennsylvania

As part of our ongoing efforts to refurbish existing sites, we replaced an older ammonia refrigeration system at our Williamsport, Pennsylvania facility with new units to restore capacity and provide greater efficiency. The process began in early 2022 and will be completed at the start of 2024. The project aims to eliminate end-of-life equipment in favor of new, more efficient units and to remove production bottlenecks and risks associated with the legacy equipment.

The production lines at Williamsport rely on chilled water to operate. Recognizing that this water was cooled by four ammonia compressors that were at the end of their design life and no longer able to reach 100% capacity, we replaced the old units that are both reciprocating compressor type chillers, with new screw-driven compressors. Screw compressors are more efficient and provide a savings on electricity during runtime of roughly 33% per unit.

Removal of the previous unit freed valuable space for future expansion projects at the site, while simultaneously reducing the ammonia required by 23%. The refrigeration upgrade is representative of our efforts to identify opportunities to upgrade equipment for enhanced efficiency. This is particularly impacfful to our environmental footprint as we move toward a more efficient business model.

Balancing safety, efficiency and environmental impact: process optimization for VOC reduction and enhanced workplace safety.

In our ongoing pursuit of optimization, we initiated a project in 2023 at our Rochester, New York facility, to enhance the safety of our associates, reduce our environmental footprint and improve process efficiency. The project will install a state-of-the art filtration system to reduce emissions and improve the work conditions and well-being of our associates. The equipment is completely closed, which will prevent emissions from the unit and potential exposure to contaminants, while eliminating the need for respiratory protection in the area. The enclosed system can be operated at lower temperatures and with less water, so not only will VOC emissions from the process be reduced by almost 1000/o, but solubility losses will be minimized, resulting in decreased TOC emissions to wastewater and overall decreased water consumption.

Our proactive approach to process optimization underscores our commitment to sustainable manufacturing practices while prioritizing safety and efficiency. Through innovative solutions and technology upgrades, we not only transform our operations, but ensure a safer workplace, minimize environmental impacts and improve overall reliability.

^{[9]Based on our 2021 baseline.}

^{[10] Our definition of net zero is aligned to the SBTi definition: Reducing Scope 1, 2 and 3 emissions to zero or to a residual level that is consistent with reaching net-zero emissions at the global or sector level in eligible 1.5°C-aligned pathways and neutralizing any residual emissions at the net-zero target year and any GHG emissions released into the atmosphere thereafter.}

^{[11] The scope of our Scope 1 and 2 data, includes all manufacturing sites with FTE >10 (note, Auckland New Zealand and Trentham Australia manufacturing sites are included even though they have less than 10 FTEs) and Pilot Manufacturing sites with FTE >45. Emissions from offices are not included, as these are not material to Arxada’s overall emissions.}

^{[12] Our Scope 1 emissions include the direct emissions to air from our operations, including CO₂, N₂O, CH₄, from fuels (e.g., LPG and Fuel Oil). Arxada does not have emissions from PCF, HFCs or SF₆.}

^{[13] Our Scope 2 emissions are composed of purchased electricity and steam. For European locations, instead of the applicable residual mix factors, location-based IEA factors have been used.}

^{[14] Our Scope 3 data includes Arxada (legacy LSI), Troy and Envirotech. The Scope 3 emissions calculations exclude the following categories: Upstream leased assets (Cat. 8), Processing of sold products (Cat. 10), Use of sold products (Cat. 11) , End-of-life treatments of sold products (Cat. 12), Downstream leased assets (Cat.13), Franchises (Cat.14), Investments (Cat.15). As an improvement of our Scope 3 approach, our 2022 and 2023 data also include Processing of sold products (Cat.10) and End-of-life treatments of sold products (Cat. 12). For our Waste generated in operations (Cat. 5) data, the footnote 1 scope limitations apply.}

^{* Metrics have been assured by ERM CVS. For more information, please see the “External Assurance Statement” which details the scope, activities and conclusion of their engagement.}