Ladies and gentlemen, welcome to the Rockwool ESG Investor Call. Today, I'm pleased to present CEO Jens Birgersson, SVP Group Marketing, Communications, and Public Affairs, Mirella Vitale, and Director of Sustainability, Anthony Abbotts. For the first part of this call, all participants will be in listen-only mode, and afterwards, there'll be a question-and-answer session. As a reminder, this conference call is being recorded. I will now turn the presentation over to your host. Please begin.
Okay, good afternoon, everybody. This is Mirella here. We're trying this in a slightly new way from remote locations, so please, somebody stop me if the sound is unclear at a certain point. But if we go to slide number two, you will see our ESG meeting calendar. This is, of course, the last time we meet in 2020. It's been a challenging year and an interesting year for all of us, but we're very pleased to confirm that we will be continuing with our ESG calls throughout 2021.
The dates have already been established and should be unchanged, and we ask you to reserve the date because we very much look forward to sharing more information with you on a continuous basis throughout next year.
Then, if we move to slide number three, the agenda for this call is for us to give you a little bit of background of what has taken us here to where we are today. Then we will give a brief background as to what the Science Based Targets initiative is all about, who's behind them, and where they all started. Then Anthony will give you some detailed insights into the Rockwool Science-Based Targets, as well as an overview of the three pillars that are the foundation for our decarbonization targets that have been announced during last week.
And then we will do our best to stay on time today and leave you all ample time for a Q&A session. If we jump directly to slide number five, as I said, we wanted to give a background as to why we are here today and what got us here.
The Paris Climate Agreement that I'm sure you all know everything about it was the sort of turning point for the climate agenda because it was the first legally binding international treaty on climate change. Of course, there had been many actions before that, but this was the first time that actually the signing parties agreed to a legally binding commitment. It was signed on December 12th, 2015, so exactly five years ago, but it actually didn't enter into force until almost one year later. It actually entered into force in November 2016.
The main goal of the Paris Agreement is to limit global warming to a well below two degrees scenario, or even preferably to 1.5 degrees, and it's compared to pre-industrial levels. There's a lot of discussion about what exactly pre-industrial levels mean and when is the cut-off date for defining that.
Initially, the dates had been defined between 1850 and the 1900s, but the economists actually argue that it is much more precise if you go back to 1800 because until the year 1800, there actually had been no sign of global economic development in the world. But then after the invention of the steam engine in the United Kingdom, that's when global economic development really took off. Up until then, there had been virtually no growth in the planet. So what is considered to be human activity that has impacted the climate, the dates that economists are now arguing for are between 1780 and 1800.
So there's still some discussions, and depending on where they land on recording pre-industrial levels, will also define what target we actually reach in 2030 and 2050.
The 2030 agenda was then adopted by all the members of the United Nations at the end of 2015. It's very often confused with the Paris Climate Agreement, but it is slightly different. The Paris Climate Agreement is exactly that. It's about lowering greenhouse gas emissions and focuses only on the climate, whereas Agenda 2030 is very much a blueprint for global prosperity, and it's actually about driving economic growth, but driving economic growth while maintaining a sustainable future and making sure that we preserve our oceans, forests, and biodiversity.
So they're not exactly the same thing, even though they're very often interchanged as the same. They actually have different focus areas. So that's what took us to where we are today. If we go to slide number six, Rockwool still has and maintains our own sustainable goals. There is no change to those.
We keep our fixed goals, and they will be reported in our next sustainability report that will be issued early in Q1 next year. Actually, for next year, the way we measure our goals will actually have external assurance. We continue to have a commitment to drive the increased positive contribution of our products in society while at the same time driving down the impact of our operations, and this will continue. Nothing has changed here.
It's just enhanced and reinforced by the science-based targets that we will communicate, so we continue to measure up our own sustainable goals towards the sustainable development goals issued by the United Nations. If we go to slide number seven, this slide you've seen several times. It is just a reminder that already today, Rockwool is a net negative carbon company.
Over the lifetime of its use, our building installations sold in 2019 will save 100 times the carbon emitted in the production process, so this continues to be a focus area for us. We will continue to reduce the carbon footprint of our production and at the same time explore ways of improving our product performance, and we are making progress in both areas and continue to focus on both areas, but we just felt it was an important reminder that already today, while we are working hard to improve our operations, our products work hard for us and actually already lower the emissions in society.
As the Renovation Wave in the EU announces, having insulation and energy efficiency is the most cost-effective way of lowering greenhouse gas emissions, and you'll see that the insulation products are paid back within six months of their being installed.
This is, again, just a reminder that already as we are today, we are a net negative carbon company. Moving on to slide number eight, there's been a lot of sort of discussion about the EU Taxonomy eligibility. 95% of our insulation business is Taxonomy eligible. The background of where we are today, there have been two delegated acts for the Taxonomy on climate change mitigation and climate change adaptation that have been published by the Commission. They're actually open for consultation right now as we speak.
This delegated act should be adopted and signed off in its first round by the 31st of December this year, but will actually go into force from the 1st of January 2022.
There is no change to our eligibility in the EU Taxonomy as we are considered a product and a manufacturer which is delivering substantial contribution to climate change mitigation by improving energy efficiency. Right now, our products are included in section 3.5 as a manufacturer of low carbon technologies. There is, of course, as I said, a consultation process where we are actually discussing the fact that we would feel better placed within section 3.4, which is about the manufacturing of energy-efficient equipment for buildings,
considering that cladding and roof building materials are already included in that segment. Again, this doesn't change the fact that we are today EU Taxonomy eligible, but we just feel that it would be clearer and more fitting that we would fit into section 3.4. But also within 3.5, our products continue to be eligible for the EU Taxonomy standards.
And of course, anything different would be a clash to what is already communicated by the EU Green Deal and the Renovation Wave, where there is a very high focus on ensuring the deep renovation of buildings to achieve the greenhouse gas emissions of the EU. And the news that we have just from Friday last week, that the vetoes have finally been lifted from both Poland and Hungary. So the 55% target is again confirmed and on the table for that 2030 ambition in the European Union.
And again, where Renovation Wave already plays a very significant part of that 2030 agenda. So with that, I will pass it over to Anthony, and he will go through the science-based targets.
Thanks, Mirella. So slide nine, I'll start by talking about the science-based target initiative, so the organization behind science-based targets, and then I'll move on to talking about our specific science-based targets that we have committed to. If we move to slide 10, so the science-based target initiative, nonprofit organization supporting companies to set climate-related targets aligned with the latest climate science. SBTi consists of four main organizations: CDP, previously known as Carbon Disclosure Project, United Nations Global Compact, World Resources Institute, and the World Wildlife Fund.
And then there are a number of funders behind the organization. The main ones, an IKEA Foundation, We Mean Business, which is a nonprofit organization working with leading organizations within climate change. One of the partners of We Mean Business is the Climate Leaders Group, of which Rockwool is a member, and then the UPS Foundation.
The SBTi organization came out of the Paris Agreement that Mirella was talking about back in 2015, and we feel that it's the most credible organization when it comes to greenhouse gas target setting. The organization has developed a huge amount of guidance material to explain the background for science-based targets and to support companies like ourselves in setting targets and explains what qualifies as a verifiable science-based target. From submission to approval, it takes 30 working days, where the submission is assessed by a dedicated SBTi technical team.
If we move to slide 11. So according to this slide, over 1,000 companies have made a commitment to setting science-based targets. I was actually on the Science Based Targets website this morning. It's now up to 1,106. And of those, 542 companies have approved verified science-based targets.
So 542 companies globally, which of course is a vast minority of the companies that are in this world. And then when you look at the percentage of those companies, those 542 that have approved verified targets, then max 15% of those are energy-intensive companies like ourselves. So we're talking about around 80 companies that are energy-intensive, which puts into perspective the ambition level that we as a company have when it comes to decarbonization. We're part of the building products sector category according to SBTi.
An example of a company within the construction materials sector would be the cement company LafargeHolcim. If we move now to slide 12, then we'll dig now into the specific science-based targets that Rockwool has committed to. And if we move to slide 13, we would like to start by sharing with you a video of our SBT commitment.
If you have problems viewing this video, then you can go in to our dot com after the call and watch the video. It's worth the effort. So please, operator, play the video.
Over the past 50 years, we have all become increasingly aware of the need to combat climate change. But how can we make a positive change and reduce carbon emissions when everything we do takes energy? Even saving energy takes energy. For decades, Rockwool has been saving more CO2 than was emitted in our production. In fact, Rockwool's stone wool insulation saves 100 times the CO2 emissions and the energy that went into making it. To meet the Paris Climate Agreement goal of keeping the temperature rise well below two degrees, we all need to do more, a lot more.
That's why Rockwool has now set science-based targets with a commitment to cut one-third of total life cycle emissions within 15 years. This will be achieved by increasing the energy efficiency of our factories, investing in technology innovation, and exploiting the natural circularity of stone wool.
This is a big shift, a necessary shift. It's time to build a better future.
So I hope all of you will manage to see that video again. If you didn't, then you can go into our dot com. We turn to slide number 14. So what targets have Rockwool set? First of all, we will reduce our absolute Scope 1 and Scope 2 greenhouse gas emissions by 38% by 2034 from a baseline 2019. And we will reduce our Scope 3 emissions by 20% within the same timeframe. So if you look at Scope 1 and 2 emissions, 38%, that's equivalent to an annual linear reduction of 2.5%. Our Scope 3 emissions target is equivalent to 1.3% annual linear reduction.
A reduction of any emissions coming from organic growth will be on top of this. The targets together equate to an ambitious one-third reduction of Rockwool's life cycle greenhouse gas emissions by 2034. And here it's important to highlight life cycle emissions.
One cannot judge the ambition level of any company's decarbonization commitment before seeing it in a life cycle perspective. For example, some companies have the vast majority of their emissions in Scope 3. There was an interesting article, for example, this morning in Jyllands-Posten, which focused on the importance of Scope 3 emissions. It's also important to emphasize that our decarbonization trajectory is consistent with SBTi's definition of a net zero carbon trajectory.
While we will, of course, be focusing on achieving these science-based targets, we will continue at the same time to focus on reducing our carbon intensity, carbon emitted per ton produced of our production, and that means that we will focus on also meeting the goals that we set back in 2016 of 10% improvement in carbon intensity by 2022 and 20% improvement by 2030. We move to slide 15.
So the targets for Scope 1, 2, and 3 together will achieve an annual reduction by 2034 in life cycle emissions of 1 million tons. So by 2034, we've reduced our life cycle emission footprint by 1 million tons. That's equivalent to 200,000 passenger cars not driven in one year. Now, let's put that into perspective because when we look at the impact from our products, and Mirella has already mentioned that we're a net carbon negative company, when you look at the impact from our products, then we're actually saving 3 million tons per year, 3 million tons per year.
So that's equivalent to 600,000 passenger cars that are not driven in one year. And that's already happening today. We move to slide number 16. And this is just to make sure that everybody has understood the difference between Scope 1, 2, and 3.
These definitions are based on the Greenhouse Gas Protocol. And again, important to underline the importance of focusing on the whole life cycle when estimating the carbon intensity of a company. So Scope 1, all direct emissions. So that's basically the emissions coming from the factories, for example, through fuel combustion. Scope 2 emissions, they're related to the emissions from the generation of the electricity that is consumed in those factories. And then Scope 3 emissions are all the remaining emissions in the life cycle.
So they can be upstream emissions from the supply chain, and they can be downstream emissions towards end of life. They're the three scopes. If we move to slide number 17, now we talk about the how. And in order to achieve the Science-Based Target of 38% reduction for Scope 1 and 2 emissions, we will be using predominantly three key pillars or levers.
If we move to slide number 18, and those are energy efficiency, an area that we have been focusing on and practicing for decades, technology innovation with particular focus on our furnace development, and thirdly, circularity of further development of our strong circular business model and thereby exploiting the inherent recyclability of stone wool. Together, Scope 1 and 2 emissions are equivalent to approximately 2 million tons CO2 equivalent. We move to slide number 19.
Mirella was already talking about earlier the importance of energy efficiency, the fact that it's a prerequisite for us to get to achieve the Paris Climate Agreement goals in 2050. And of course, we will be walking the talk here in driving improved energy efficiency in our factories. And that will be both in terms of normal operation, but also in connection with new factories and retrofits of existing factories.
So our focus will continually be to reduce the energy intensity of our production and also the carbon intensity of our production. We move to slide 20. The second pillar, technology innovation. And here there are, in particular, two types of technology that we'll be focusing on. The first, in relation to large-scale electrical melting. We've talked about in previous ESG calls the pilot that we are installing, the pilot electrical melter that we're installing in Moss in the southern part of Norway. It's something that will be starting production here later this week.
Here we're going to be reducing carbon emissions at that factory by 80%. So that's one of the technologies we're going to be looking at, particularly relevant in countries where the electricity grid is already low carbon. Second technology is fuel flexible technology that we have spent years and many engineer hours in developing.
This technology allows us to shift from coal to less carbon-intensive energy. If we look at Denmark, we first converted from coal to natural gas, and then from the 1st of January next year to biogas, and that will result in us meeting the Danish goal of 30% improvement in CO2 emissions compared to 1990, well before 2030. We will also be converting other factories that are using this fuel flexible technology. We will be doing that in Poland in 2021, and we'll be starting up a new facility in the United States on natural gas rather than coal.
If we move to slide 21, our third decarbonization pillar is relating to scope one and two emissions. That is circularity. We've talked at previous ESG calls about the importance, at European level at least, of achieving carbon neutrality by 2050 through circularity measures.
von der Leyen has said 50% of the carbon reductions need to come from circularity measures. And we're seeing increasingly focus in the draft regulations that are being developed in the EU Green Deal, in the Renovation Wave, increasing focus on circularity. Our circular business model contributes to a less carbon-intensive production in two main ways. Firstly, through recycling and upcycling waste from other industries, thereby substituting virgin stone, and also through the recycling of stone wool material flows, either generated in the factory or from take-back systems in the market.
And going forward, we will be focusing on increasing this impact. We move to slide 22. So that was Scope 1 and 2 emissions, 2 million tons, and the three pillars that we'll be focusing on to drive our decarbonization agenda.
When we look at Scope 3 emissions, which is equivalent to approximately one million tons, then we will be focusing on upstream emissions, i.e., the supply chain, and the reason for our focus on upstream emissions, one of the main reasons is that there are limited end-of-life emissions from incineration associated with our products, unlike other materials, so our focus on recycling will continue to maintain that situation of having relatively low end-of-life emissions, so when we look at our focus on upstream emissions, that focus will be particularly on two areas.
First of all, through the electrification of our factories, we're going to be able to remove upstream emissions associated with cokeries, so the facilities that are producing the coke that we're using in some of our facilities, and then we will be working with our suppliers to reduce the carbon intensity of the materials that we purchase.
And through those efforts, we will aim to meet the science-based target of 20% reduction by 2034. That was the final slide of the presentation. So back to you, the operator, and we can start the questions.
Ladies and gentlemen, if you have a question for the speakers, please press 01. Our first question is from Claus Almer of Nordea. We will start with two questions per participant. Please respect this. Go ahead, Klaus. Your line is open.
Thank you. Yeah, this is Claus Almer . I just have one question. Coming back to the taxonomy issue, so to speak, whether you are in paragraph 34 or 35, as I understood your comments, it actually doesn't matter. You don't see any impact whether you are in 34 or 35. Can you confirm that?
If that's the case, why is it that there's a lot of effort or a lot of focus on whether you are in one or the other? Why do you focus on whether you will be in 34 or 35? That would be the question. Thanks.
Ye ah. We only respond to that because we get the questions. We assume that you, as an analyst, worry that we are not in there, and therefore we answer. Okay. So it's important we are in there, but we haven't been worried about it. I think I said last time we had a call that when you go into all these scenarios for how to reach the Paris Agreement or get well below or below 2 degrees Celsius, you cannot do it without energy efficiency and insulation.
So we are not very worried, but since some of you are worried, since this is still a draft, together with other insulation manufacturers, we, of course, if it's better for everyone that it's in one section, then it's in there. But the key thing is we are in there now, and we will be in there. I'm absolutely confident.
Sure. And have you got a better understanding on what it would take to qualify as being a superior through two alternatives, which I guess is the selection criteria in 35? Anthony, I could actually not hear the question, Anthony. Could you take?
Yeah. So I think the question from Claus was under section 35. There is a kind of a requirement that you need to compare to the best-performing alternative technologies on the market.
Our understanding at the moment, Claus, is that there are no guidelines that exist on actually measuring that. So that's not something that we're able to answer at this stage. And that's why this whole area of taxonomy, it's maturing, right?
Okay.
But if I can just add to that, there is a screening criteria which involves the comparison to the best-performing alternative technology available on the market. But as Anthony says, those parameters and guidelines have not been specified as of yet. And so it's very unclear what that means.
Our next question is from Jason. Absolutely. Thanks. Our next question is from Josefine Johansen of Handelsbanken. Please go ahead. Yes.
Thank you for an interesting call.
My first question would be sort of dwelling on the one you spoke about before, is how would stone wool compare in terms of just focusing on emissions, reducing emissions compared to, for example, cellular foam or cellulose? That's my first question. And then my second question will be, from what stems the majority of your scope three emissions? Is it raw materials? So do the Science-Based Targets today cover all of your scope three, or are there certain aspects of scope three that you include in that target? Thank you.
Okay. If I take the second question first, so regarding the scope three emissions, so our Science-Based Target covers the whole of our scope three emissions. So all emissions upstream, all emissions downstream. And what would you say? Is that your question, Josephine? Yeah. Or what would you say is the main part of that? Yeah.
As I mentioned in the presentation, our main emissions, the vast majority of our emissions are upstream, and that's where we will be focusing on reducing our emissions. That will be sourcing materials, or? That will be in relation to fuels. Of course, electrification and moving away from coal will automatically reduce Scope 3 emissions upstream. Then the materials that we purchase, that will mean that we'll be working with our suppliers to get less carbon-intensive materials.
Okay. Thank you. Do you want me to repeat my first question, or? Yeah. The first question again, yeah? Yeah. How do stone wool compare to other alternatives just focusing on emissions, reducing emissions, for example, comparing to cellular foam or cellulose or just focusing on the emission savings and nothing else?
I mean, I think that our general comment would be that we are just as good, if not better, in reducing life cycle emissions. We've already talked about the fact that we're net carbon negative, so we have an enormous positiv e saving from our products, and that puts us in a good position.
Okay. But no numbers available like number comparisons?
We've had maybe it's hard to go through the table because it depends how you manufacture those materials. But there is one quite big difference, at least between stone wool and foam. We use energy, of course, when we melt, and that we take over to more green energy now.
But what you have with the foams is that half of if you take a ton of foam, say that the total of scope one, two, and three, CO2 is about a factor of five tons then, and half of it sits from the time it leaves the kind of foam manufacturing. So you have a much heavier scope three downstream on the foam end of life. And that's why we also put the why we felt to get sensible comparison to set the goal on scope one, two, and three so that you includ e both upstream and downstream inside the fans on the electricity.
Okay. Thank you.
Okay. Thanks.
Our next question is from Christian Johansen of Danske Bank. Please go ahead. Yes. Thank you.
So just again, on the taxonomy, you say that there, in your view, is no difference from being in section 3.4 versus section 3.5, and you've only included because we've been worried, so personally, one of the reasons I've been worried is that we have this technical screening criteria, which says you need to demonstrate superiority versus the best-performing alternative product available in the market, and then you say you don't know exactly what is meant by this.
That still leaves me worried then. I mean, if you don't know exactly what this means, why should I not be worried that it means you need to demonstrate superiority versus foam or glass wool?
If I could maybe jump in here, this is Mirella. Oh, that's Mirella, yeah. No, I just wanted to say that also, I mean, you could put the same question for 3.4.
3.4 talks about external cladding and roofing systems. Again, in our mind, external cladding includes insulation. A roofing system includes insulation. Otherwise, we don't understand how the cladding system or the roofing system would contribute to the energy performance of the building. Again, that definition has not been made yet, but we would have to presume that in order to achieve what is laid out by the EU directive for energy performance of buildings, cladding without insulation would not enable that building to achieve that performance.
So again, we're waiting for exactly those criteria for the screening to be more clearly defined. Tim, I don't know what you want to say.
Maybe on the worry side, when you look at if you take the steps on the manufacturing, and then you also introduce the circularity, which also have a huge impact on the overall equation, stone wool is quite unique in that respect. So for that reason, we don't worry. I don't think that they're going to, through taxonomy, say that you can't use foam, you can't use glass wool, you can't use stone wool. These are all very useful technologies. You can talk about degrees of differences and features. So I don't think the EU will sit and come up with a definition where one material disappears due to the taxonomy.
The main thing is to say the energy saves CO2, and then within those segments, of course, we want to have the best possible footprint we can have. With the strategy we have put in place, we feel confident that we will be extremely well positioned.
I understand that. I mean, do you have any expectation on when you will have some better clarity on this technical screening criteria? Because I mean, I think at least I mean, you were creating the concern. Anthony, Mirella, do you know how long this process runs?
I mean, the consultation process runs until the end of this year. We are speaking to all the relevant offices, DG Energy in the EU. We're also, as Anthony mentioned, together with other insulation manufacturers, trying to get more clarity on definitions. The expectation is that we would get a little bit more clarity towards the end of the year. Also, the EU commissioners that we're speaking to give us the same comfort. My expectation would be January latest.
Okay. Do you have any flavor on why insulation was removed from section 3.4?
Again, I really don't think that it was purposely removed. I think that, again, generic terms such as cladding that we see all the time, that cladding is confused with the external facade and insulation, the same as roofing. It's just very generic ways of communicating it. I don't think that there's sort of any purposeful intention to remove insulation.
I mean, something we have.
Sorry, I was just going to say, Anthony, it would be a complete clash with the European Renovation Wave.
I mean, something we have heard, Mirella, is that one of the reasons for moving into section 3.5 was because there was a concern that the requirements in section 3.4 were actually too strict. They wanted the possibility of other materials being able to also qualify in 3.5. That's, again, confirms that we're simply not worried about this. It's a move by the commission to allow for more materials to be included in the taxonomy definition.
Understood. Thank you.
Our next question is from Michael Rasmussen of SEB. Please go ahead.
Hi. Thank you for taking my question. This question is regarding the retrofits of your current factories in Europe. You mentioned you switched the source in Denmark and Norway, but can you try to quantify how many of your current coal plant or source from coal are able to change to gas as the primary energy source?
Yeah. I mean, we don't disclose, sorry, Jens.
Do you want to answer that? No, go on. Go on.
Yeah. I was just going to say we don't disclose how many lines that we have of the different using the different energy sources, but there are a number of lines where we're able to convert from coal to natural gas.
Okay. Thank you. And then my second question is regarding the Norwegian electrical melter. The technology used, is that something you have patent on, or is it something that's available for the competitors as well?
Electrical melters are available, but what we are doing here is our own variant on it. You can have different ways of protecting the technology. Sometimes you patent them. Quite often, you don't patent. You just keep it secret. So it's a lot of know-how to put it together if you want to make a more high-performing or to push the boundaries a bit more. And we do a lot of that work ourselves.
So it's a mix of those two things.
All right. Thank you.
Our next question is from Xintong Ouyang of Ampfield Management. Please go ahead.
Hello. Good afternoon. Thank you for taking my question. The first one is on your 2016 target for 2022 for the carbon intensity. If I look at 2019, you reduced by around 4%. It means that for the next, including 2020, you will have to reduce by 6%. This seems like to be an acceleration. So I'm just wondering, apart from the shifting of energy sources, are there any other measures that will help you to achieve this accelerated pace?
So Anthony here. So regarding the goals that we set in 2016, baseline 2015, achieving by 2030, interim goal in 2022.
You quite rightly point out that last year we had achieved a 4% improvement, but we are on track to meeting the 10% improvement by 2022. And in terms of what levers we have to improve our carbon intensity, so they were the three levers that are mentioned in the presentation. So the technology innovation, which was the one, but the other two, which are, of course, also vitally important, continuing our focus on energy efficiency. And energy efficiency improvements come from many different kinds of activities. It's incremental.
There's not one quick fix. It's dedicated work over a long time period, but we'll be continuing to be serious about driving that agenda. And then the third agenda, the third pillar was the circularity focus. So looking to see how we can, through the recyclability of our stone wool, improve the carbon intensity of our factories.
And just to give an example, in Denmark, in the ones that we've gone over to gas, we did that this year. And now, from the first of January, we go to biogas, and that will have an impact. And the change we do in Norway, we are starting up now as we speak. So I mean, we have been building for a while. So the investments have gone in, but we are still starting up. And then we start to see the effect from next year and the year after.
So it's not that we haven't worked on it. It's just that some of these are binary. We need to switch the machine now.
I see. Thank you. That's clear. And then my second question is just.
But it follows our plan, and we don't aim to miss our target.
Okay. Great. Thank you. That's clear.
Then my second question will be on the circularity itself as the third pillar. I'm just wondering what kind of financial impact you would have if you increase the recycled raw materials in your production process. How much cost will they be able to save versus virgin materials? And then also, based on, say, your interactions with your ESG investors, how would they perceive firms with high circularity and also firms with low circularity? What kind of difference in attitudes that you're seeing sometimes?
I'm sorry. My line is very poor. Anthony, how do you repeat the question? Or Mirella and Anthony, you take the question.
The first question, which is perhaps a question you can answer, Jens, was relating to the cost benefits of being able to recycle more material in our factories. I think that was my understanding of the first question. So maybe you could take that one, Jens.
Yeah. I would say, obviously, it's nice to run a factory of virgin materials. It's right from the mine. It's a bit more complicated. You need to guard the process more, and you need to be more alert to stay within the quality parameters. It's certainly more difficult, but it's not when you sum it all up, most of these efforts or changes, they don't drastically change the cost position. Sometimes you might have a disadvantage for a while, and then you learn it, and then you have a slight disadvantage. So I think the bigger effects are more things like you have a country, and then you go on to electricity.
That's not the case in Norway, but you go on to electricity, and then maybe the electricity price goes into a different league than, say, normal electricity would do or coke would do. So you have some of these more commodity changes, and also in some countries, electrical network might be expensive if you go for electrical. But generally, our experience is we have been quite good at kind of moving without moving the cost position too much up or down.
A nd then the benefit of making the move is that the requirements from customers is increasingly going the way that they don't want to just send their old factory or their old roof to the landfill. So we have seen several years, for example, with some of the car manufacturers taking the old product back.
And I'm involved in a couple of deals, and that's one of the really important discussions before we start to discuss the new supply. So I think that customer awareness is increasing all the time, especially, I would say, in the Nordics. And then it's also that depending on what technology you apply, for example, in Norway, the way we set up that electrical melter, we have made it so that it's very, very easy to use old materials, waste flows from other industries, old stone wool, and put into it.
So we try to think of that in the design, the newest technology that it works for recycling. And then over time, you learn. And if you take, for example, the cost development curve for tthe melter in Doense , we have managed to improve how that piece of equipment runs every year since we built it 5, 10 years back.
And I think that's already what we see with gas, and I'm sure we'll see it with the new biogas.
So I'm going to quickly answer your second question because I realize from the time perspective that we're running out of time, and there's a couple more questions that we need to take. But from a circularity perspective, whether there's an interest from our ESG community on circularity, then I would say it's growing. There is an increasing acknowledgment that being a truly sustainable business, you need to have a circular business model. We need to move away from a linear business model to a circular business model.
When you see the increasing costs associated with landfill across Europe, for example, and the increasing regulations that are focusing on take-back systems, then clearly there is a need for companies like ourselves to move in that direction. But of course, we're also seeing it from the customer side as well. And there are a number of markets where we have customers that are asking and requesting for services for take-back systems. Thank you.
Thank you very much. That's very helpful.
Our next question is from Lars Kjaergaard of ABG. Please go ahead.
Yes. Good afternoon, Jens, Mirella, Anthony, and everyone else listening in. A few questions from my side. First of all, concerning the Polish factory that you mentioned on slide 20, could you just talk about which Polish factory it is, how you chose it, and why not going straight to electrical melting technology?
Shall I take that, Jens?
Yeah. Thank you.
Yeah. So thanks for your question, Lars. So the facility in question is in Cigacice. And the reason that we have chosen that particular line for the conversion is because it has the fuel-flexible technology, so where we're able to convert from coal to natural gas. This is the one in the western part of Poland, right?
Y eah. The one that we visited. Yeah.
Yeah. That's right. Right. And when is it?
Just one more comment on that. And it has to fit the logic that if you look at the electrical grid in Poland, it's not very green yet. And this is quite a quick transition we can make doing this. And then we feel it makes sense to go on to gas and get the CO2 footprint down. But that doesn't prevent later on that we take further steps.
But this is similar to what we did with that technology in Doense.
And what is the timeline? When will it start being well, when will you start investing in it?
We are investing in that. And to be honest, it's not a huge investment or anything that you will see in the.
Yeah. But is it shut down at the moment then in terms of?
Oh, it's not running. But we build stock for that, and we can back it up with other factories. So as long as we have a bit of overcapacity, we take care of that. In Norway, maybe the filling-in distances are bigger, but in Poland, we can deal with that relatively easily since we have several line s in Poland.
That's very clear. Thank you. And then maybe a question ESG-related to Anthony and Mirella.
In terms of, again, on page 20, you mentioned this Moss factory reduction of 80% in carbon emissions. Could you split that in Scope 1 and 2 and perhaps even 3? And what are the reductions for the other initiatives, for example, going to the biogas or the fuel-flexible technologies?
Yeah. So if we look at Moss, when we say 80% reduction, we're only talking about Scope 1 and 2. And I don't have the split between Scope 1 and 2, but the majority is Scope 1 and then Scope 2. Yeah. So that's the 80%. And then when we look at fuel-flexible technology, so if we're converting from coal to natural gas, for example, then we're talking about an improvement of around 30%. And then, of course, if we're converting then from natural gas to biogas, then we're getting down to almost zero. Yeah. So 0%.
If we talk about one of your other analysts, they asked about the CO2 emissions and energy efficiency on page six, which obviously are a little bit ambitious still. You mentioned, I think, Mirella, these are being audited by an auditor, I guess. Is there any fear here that they could perhaps do different calculations that you're doing at the moment? Different calculations? How do you mean, Lars? So if they would change any of the historical data? So for example, you mentioned 4% in 2019. Is there any risk an auditor could go in and question that number?
I mean, there will always be that risk because that's the auditor's job to question. But we don't see any issues or any challenges in our baseline. We're pretty sure that they'll result in the same figures as ours, that we've achieved that 4% reduction.
But of course, it's in the nature of auditors to ask critical questions.
I think it's important to say that we didn't arrive at these numbers. We tried to calculate to say things happen as we run the business and we need to have also room to grow. So we have a number of parallel efforts, and then we can tune a little bit how much we do. When it comes to calculating the emissions and that, we have much less guidance on how to do it back in 2015 and 2016 than when we started doing it.
And we try really to do it so it makes sense to us and check it. And we have also already, for many of the calculations, verified with people on the outside that have helped us do it. But there is one clear trend when we do this.
If you want to understand it yourself, the sustainability department becomes much more heavy on mathematics and physics and calculations than just talking about the result. And we have gone quite far on that side and really tried to document how we calculate. So if there were to be an audit where we make some sort of change, at least you will understand very well what it is. But I think that, as we normally are, we're a bit conservative. I hope that will be the outcome.
But since we do all of this ourselves and use some consultants to help us, we felt it's good if we can audit them so that we get the question mark out of the way.
That's super. Thank you very much. Maybe just a quick comment from my side.
If in the future you would consider doing some sort of bridge until 2034 in terms of the initiatives that you're talking about, not necessarily concretely, that might be quite acceptable by the financial markets if there would be something you could look into.
I know that. And we obviously have that bridge. Yeah. And we have done it, but then we get so much into a long-term forecast of investments and all the rest. And we want to keep a bit of flexibility in how we approach it. And some of the decisions are also availability-driven, availability of electricity in countries. You need a high-voltage connection with quite some MVAs to it into the plant. And it's also to some extent driven by what technology we choose and also what type of grants and benefits you can have by doing some of the investments.
So therefore, we have for now said we don't communicate our bridge. But once we are a couple of years into this, you're going to see the type of measures we have. We also have some additional R&D that we haven't tested yet, but we are working on testing. So we also want to enhance the different technologies we are planning. But I understand that we would like to see the bridge. But I can tell you we have one, and at the same ti me, we allow ourselves for further R&D and also some failures along the way. That's super.
Thank you very much, Jens, and the rest of the team. Our last question comes from Cedar Ekblom of Morgan Stanley. Please go ahead.
Thanks very much, Gentlemen. I'd like to dig into some of the CapEx implications to move your facilities away from coal towards gas or electrification.
Can you give us some expectation of the CapEx associated with that, maybe in total over the next nine years or so, and on an annualized basis, how we think about the phasing of that CapEx? And then can you also. Did I just hear on that? On the CapEx number. I didn't get it. Sorry. Well, if you could repeat the answer, that would be really helpful. And then the other part of the question is, can you give us some guidance on.
I know you're not giving any details, but it's helpful to have the details just to try and understand the percentage of your asset base that you see moving to gas, the percentage of the asset base that you see moving to an electric-based system? Because it's quite. I mean, it's helpful to have a long-term target, and we appreciate that.
But the details around driving to that is really useful for us to understand. Yeah. Yeah. And I have to disappoint you, as we have done so many times about the CapEx forecast, that we don't make that, and we want to prove by first meeting 2022 and then keep going. And then you're going to see it along the way as we can announce when we actually do things and also when we prove some technologies and that we progress that way.
And then, of course, to say exactly where to go for gas and where for electricity and where to do that overall plan, we don't feel we are ready to communicate at this stage. That doesn't mean we haven't done a lot of detailed work, and we feel comfortable that we're going to hit this target.
Can you maybe give us some guidance on the facilities that you have already earmarked for the conversion? So fine, you don't want to give us CapEx for the entire transition, but we've got as.
You can say it like this. Over time, but not all of it by 2034, we want to get out of all coke and coal. The first is not to get on the trajectory and deliver on the target and then keep going. That's as much as I can say today, unfortunately. As a direction, of course, we want to keep reducing our CO2 footprint and also Scope 3, keep going on that. To start, we want to prove that we can come onto that well below 2°C trajectory.
Have you provided CapEx on the transition at your Moss facility in Norway?
I don't know if you've given a number of that to move to the electric facility. Yeah. I think we did, didn't we? The one in Norway, we have already explained this is a pilot project for us. We did spend EUR 35 million in investment, and then we obtained EUR 10 million grant from the Norwegian government, i.e., a net of EUR 25 million. And we've also said previously that the conversion from this fuel-flex operations in Doense to gas only cost a few million euros.
And that's a similar type of investment we see in Poland next year. And are those numbers to fully transition both of those assets, or is it only a portion of the footprint at that asset? So in Norway, that EUR 25 million net, will the entire facility be on the electric melting technology, or is it a selection of lines within that asset?
In Norway, there's just one line that will be on electricity. Okay.
Okay. Thanks very much. Appreciate you guys aren't giving the detail, but it's useful to understand how much these things cost and how to think about the phasing of the spend. But hopefully, we'll get that over time. Thank s very much.
Okay. Thank you.
Ladies and gentlemen, we will now close the Q&A session. I'll turn over to your host for any final remarks.
So on behalf of the team here, also in Sweden and in Italy, thanks for another good constructive call. Thanks for some good questions. And we wish you all a Merry Christmas when you get that far. And safe and happy Christmas to all.