Resource use and circular economy

The ‘Resource use and circular economy’ chapter meets the disclosure requirements of ESRS E5 and is based on the results of the double materiality analysis. Material topics for the KION Group are managed in the context of the ‘Circularity’ action field.

Material impacts, risks, and opportunities and their interaction with strategy and business model in relation to resource use and circular economy

The double materiality analysis described in the ‘Description of the process to identify and assess material impacts, risks, and opportunities’ chapter identified the positive and negative material impacts, risks, and opportunities outlined below in relation to resource use and circular economy in the KION Group.

Depletion of natural resources (negative impact)

The KION Group has identified the depletion of natural resources through the consumption of various raw materials, input materials, and rare precious metals as a material negative impact. The depletion of natural resources in a linear economy can have long-term consequences for people and the planet, leading to the destruction of ecosystems or water scarcity. The resulting fluctuations in commodity prices can put pressure on the economy as a whole and lead to social upheaval. The KION Group’s business model is based on the manufacturing of products for which a number of raw materials and components are required. To mitigate the depletion of natural resources, the KION Group can directly influence sustainable sourcing, for example by purchasing recycled products.

Use of recycled materials and components (positive impact)

Besides virgin resources, the KION Group also uses raw materials with a recycled content in its production, such as steel and iron, which saves finite natural resources and protects ecosystems. The KION Group thus reduces the potential waste involved and helps to avoid the GHG emissions that the extraction of new raw materials entails. Together with these positive impacts, the KION Group believes that the use of recyclates and refurbished components is also an important building block for growing its business as it provides better coverage of the Group’s resource needs. To achieve this aim, adjustments must be made to the upstream value chain.

Manufacture and disposal of batteries (negative impact)

Due to technological advances in batteries, the KION Group has identified material negative impacts in the production and disposal phases. When producing batteries, particularly lithium-ion batteries, a number of materials are used, including flammable substances, heavy metals, and electrolytes that have a potentially harmful impact on the environment. Improper disposal of these materials can not only cause pollution but can also endanger people, animals, and plants. The KION Group produces its own lithium-ion batteries for the products powered by electric drives in the Industrial Trucks & Services segment. The Group ensures the safe disposal of leased batteries that are returned after use by the customer and over which the KION Group retains beneficial ownership. Where batteries are sold to customers or dealers, however, the waste disposal obligation is transferred along with beneficial ownership.

Loss of competitiveness (risk)

There is a material risk for the KION Group if its competitive position is potentially weakened. The resilience of the KION Group could be under threat in the long term should competitors succeed in fully implementing circular economy strategies ahead of time. Customers, including major customers, could prefer competitor products.

Reputational damage (risk)

In view of customer expectations with regard to circularity, an inadequate range of circular products could result in a loss of market share and damage the Company’s reputation in the capital markets. Investors’ interest in the Company could also be tangibly dampened, and obtaining corporate finance could become harder.

Raw material shortages (risk)

In the materiality analysis, raw material shortages were determined as a further risk that could entail supply shortages and rising material prices for the KION Group. This could push up purchase costs and lead to production stoppages. It could also increase inventory levels and lengthen delivery times for customers, which could have an adverse impact on the KION Group’s profitability.

New business opportunities (opportunity)

Integrating circular business processes presents a material opportunity for the KION Group to expand its current business model and tap into new customer segments. This could generate additional revenue streams. To achieve this, circularity needs to move further up the agenda in the political arena and in society as a whole in order to create the right framework conditions and facilitate a lasting increase in circularity.

Non-circular product portfolio (negative impact)

The KION Group has identified its contribution to the linear use of resources – due to a product design that follows a linear lifecycle – to be a material negative impact of its operations. Products in a non-circular product portfolio frequently comprise materials, composites, and components that are difficult to recycle. This means that valuable raw materials are lost from the recycling system, both depleting natural resources and making it more difficult and costly to dispose of these products. In the course of its business activities, the KION Group exerts direct influence on the development and design of its product portfolio, including the composition and properties of its products and solutions. At the same time, the KION Group is dependent on the alternatives available on the market to achieve consistent characteristics for products with recycled materials.

Refurbishing of products (positive impact)

The KION Group can make sure that the design of its products is potentially sustainable by taking criteria such as durability, repairability, and accessibility into account. Using a high proportion of recyclable materials also allows products to be reused or refurbished more easily. In turn, this can have a positive impact on ecosystems and biodiversity because valuable resources are saved and GHG emissions are cut in sourcing and production. Refurbishing trucks and warehouse technology and modernizing fully integrated systems are part of the KION Group’s business model. The industrial trucks in the Industrial Trucks & Services segment, of which the KION Group retains beneficial ownership, are leased to customers multiple times, refurbished between leases if required, or sold to dealers or customers following refurbishment. In the Supply Chain Solutions segment, equipment is serviced or upgraded, with older technology being replaced by newer and more efficient technology.

Organizational structures supporting circularity (risk)

With regard to a functioning circular economy, sufficient financial resources must be available for the necessary investment in the development and expansion of existing corporate structures if the risks of a loss of competitiveness and reputation are to be avoided. This can represent a financial risk for the KION Group.

Packaging waste (negative impact)

The creation of packaging waste in the course of the KION Group’s business was determined as a material negative impact. The KION Group works with complex products and equipment that are handled in great numbers along the value chain. This means that packaging waste arises in the procurement of goods in the supply chain, during the Company’s own production processes, when setting up equipment and using products and solutions at customers, and when shipping spare parts. Packaging waste, which comprises various types and forms of plastic, can be hugely damaging to the environment with the greatest impact on oceans and seas. This results in a loss of biodiversity and poses a risk to humans, whose bodies absorb microplastics through their food.

Waste from own operations (negative impact)

Waste from the KION Group’s own operations has been identified as a further negative impact, in particular waste that cannot be recycled. This includes mixed waste from demolition works or hazardous waste from production, for example paint shop residue or work materials and replaced components covered in oil. If this waste is not disposed of properly and finds its way into the environment, soil and water can be contaminated, endangering plants and living things in the surrounding area.

Waste as a resource (opportunity)

An improvement in its ability to sort and recycle waste would enable the KION Group to reuse more of its waste and integrate it into circular processes. This represents a material financial opportunity for the KION Group as it could give rise to significant cost reductions. It could also help to secure the availability of resources. Turning waste into a resource depends on further technological advances in the recycling industry and on the KION Group optimizing its internal processes.

Policies related to resource use and circular economy

The following subchapter deals with the KION Group’s material policy related to resource use and circular economy.

‘Circularity’ is a relatively new action field in the KION Group’s sustainability strategy. In the past, the focus was on internal communication, network building, and establishing the action field. A comprehensive circularity strategy including targets, KPIs, and an action plan is in the process of being drawn up for both the Industrial Trucks & Services and the Supply Chain Solutions segments (see ‘Strategy targets and target achievement in 2024’). As a result, there is as yet no central groupwide policy on the sub-topics of resource inflows and resource outflows.

Health, Safety, and Environment Standard

The KION HSE Standard governs management of the sub-topic of waste. In addition to environmental protection, it covers a number of other areas, such as health and safety aspects. The ‘Environmental protection’ chapter addresses various issues such as training, risk assessment and audits, waste management, packaging and materials management, waste recycling, climate change mitigation, emissions, and the discharging of liquid chemicals. More information on application of the HSE Standard is provided in the ‘Policies related to pollution’ chapter.

The HSE Standard sets out the requirement that all local sites must control and minimize waste, emissions, and the use of hazardous substances in accordance with national legislation and ISO 14001 or equivalent certification. The Standard also stipulates that the logistics department must design packaging in consultation with the procurement department to minimize waste and the use of materials and to reduce upstream and downstream energy consumption. Furthermore, the HSE Standard also requires all group sites to operate a program for the regular collection and disposal of hazardous and non-hazardous waste by approved contractors. These contractors must be approved and suitably qualified in their fields and hold the permits required under national legislation.

Beyond the material impacts, risks, and opportunities, other aspects – such as transitioning away from the use of virgin resources, relative increases in the use of recycled resources, sustainable sourcing, and the use of renewable resources – are not covered by the HSE Standard or other policies.

Actions and resources related to resource use and circular economy

The following subchapters deal with the KION Group’s material actions related to resource use and circular economy. In this context, the KION Group focuses on refurbishing used industrial trucks, recycling lithium-ion batteries, and improving its waste management.

Refurbishment of used industrial trucks

The refurbishing process includes disassembly, changing wearing parts, repainting, and reassembly. Used trucks, especially returned leased trucks, are carefully checked at the end of their first lifecycle of around five years and refurbished in a standardized procedure.

In the KION ITS EMEA sales and service organizations, the KION Group operates refurbishing centers at sites in Barcelona (Spain), Lainate (Italy), Stuhr (Germany), Örebro (Sweden), Poznań (Poland), and Çerkezköy (Turkey). In April 2024, the KION Group commenced work on extending its current refurbishing center in Velké Bílovice (Czech Republic). Scheduled for completion in 2025, it should significantly increase the KION Group’s refurbishing capabilities. Furthermore, the refurbishing of used trucks also continued around the world at KION sites in Indaiatuba (Brazil) and Jingjiang (China) in 2024.

Recycling of lithium-ion batteries

With regard to KION ITS EMEA Sales & Service, in the reporting year the KION Group continued its strategic partnership with Li-Cycle Holdings Corp., which began in 2023. The cooperation agreement that was signed with the latter on the recycling of lithium-ion batteries facilitates the resource-efficient recovery of a large proportion of the materials in these batteries. It means that the critical minerals contained in the old batteries can be used to make new batteries. With the material from batteries starting to be recovered in 2023, the Group’s recycling figure by weight increased substantially in 2024.

Other actions were also taken in relation to the refurbishing of lithium-ion batteries. The refurbishing of batteries creates a new product lifecycle for them, saving valuable resources and reducing GHG emissions (Scope 1). KION Battery Systems GmbH (KBS), a subsidiary of the KION GROUP AG, is the central unit responsible for refurbishing the lithium-ion batteries from the returned leased trucks. In the first half of 2024, work also commenced on drafting a workshop handbook for the refurbishing of lithium-ion batteries (48V/90V) for the STILL branches in Germany. The handbook is intended to enable the branches’ workshops to refurbish the batteries themselves, depending on their condition. The aim is to minimize journeys transporting the batteries to be refurbished centrally by KBS, allowing branches to make the refurbished batteries available to their customers more quickly and cheaply. A feasibility study for refurbishing lithium-ion batteries for the North America region was also carried out in the first half of 2024.

Improvement of waste management

In the reporting year, measures were introduced in the Supply Chain Solutions segment aimed at reducing the volume of waste being generated and increasing the proportion being recycled. The Installation Waste Management Team, which is responsible for avoiding waste, was established in 2024. At regular meetings, ideas for reducing the volume of waste that is generated at customer sites are shared and strategies are developed. Potential steps include identifying and compiling a list of suitable recycling partners, assessing sites’ waste disposal practices, and, taking this as the starting point, creating strategic waste disposal plans. The KION Group’s overarching aim is to enhance the recycling and waste management capacities of the sites.

Also in 2024, the Supply Chain Solutions segment used records and observations to create a guideline for assessing waste management at site level and determining appropriate measures. Since conditions at Dematic’s sites vary, for example due to differing requirements in each US state or to the type of waste involved, different approaches are needed in order to bring about improvements. The guideline facilitates a more precise assessment of the waste generated at different sites and sets out suggested plans of action and next steps for making waste management sustainable. The finalized guideline including recommended action is intended to support the expansion of recycling and waste management capacities of Dematic’s sites from 2025.

Targets related to resource use and circular economy

The following subchapter deals with the KION Group’s material targets related to resource use and circular economy.

Increase in waste recycling

For the sub-topic of waste, the KION Group has set itself a target of significantly increasing the proportion of waste that it recycles relative to the total volume of waste generated. The target for increasing the proportion of recycled waste from the Group’s own operations has been embedded in its sustainability strategy. The KION Group’s target for 2030 is at least 85 percent, with a baseline value from 2023 of 80 percent. In terms of the waste hierarchy, the target relates to the levels of Preparation for reuse and Recycling. The target has been set voluntarily and is not the result of a statutory obligation (see ‘Strategy targets and target achievement in 2024’)

The target was developed in collaboration with HSE staff of the KION Group who are experts in waste management. Because it is not currently possible to forecast the volume of waste that will be generated in the future, the target is based on the absolute figures from 2023 and past experience in recent years. The relevant Operating Units define their individual percentage targets using a bottom-up approach. These results are aggregated with the absolute figures to produce a groupwide target.

Conversion and construction work on buildings and factories can produce considerable volumes of waste that cannot be recycled. If such measures are planned at the Operating Units’ sites, they are factored into the target setting, even though precise volumes of waste cannot be forecast.

In terms of material impacts, risks, and opportunities in the sub-topics of resource inflows and resource outflows, there is currently neither a measurable, outcome-oriented target nor a time-bound target that is used as a central key performance indicator. In 2024, emphasis was placed on increasing internal transparency and evaluating different KPIs.

Resource inflows and outflows

In addition to providing general information about resource inflows and outflows in the KION Group, the following subchapters deal with the KION Group’s material metrics in this regard.

Various materials are used in the manufacture of the KION Group’s product portfolio. These materials are mainly composed of steel and iron. They are used to manufacture components such as masts, cabins, counterweights, or parts for storage systems, conveyor systems, and sortation systems. Process materials and semi-manufactured parts are also used in the course of production. They include chemicals, such as paint, powder coatings, and oil and lubricants. Various types of plastic and rubber are used as well as electronics. Batteries for industrial trucks are purchased or produced in-house. Packaging material, including wood, cardboard, and plastic, is also used for shipping spare parts and delivering system parts to customers.

Durability

Durability and repairability are essential properties that are factored into the product development process for the KION Group’s products. The counterbalance trucks and warehouse trucks that are produced in the Industrial Trucks & Services segment are designed to have a long life. Their construction from predominantly steel and iron helps to ensure that the industrial trucks are robust. They can clock up many hours of operation. The number varies in line with individual customer use and product configuration. A large proportion of the equipment in the Supply Chain Solutions segment is also composed of steel in order to ensure the equipment’s robustness and durability for many years. Their modular construction allows systems to be flexibly adjusted and expanded in order to cater to changing requirements.

With regard to the expected durability of the products manufactured by the KION Group, there is currently no generally recognized industry average for specific products or for product groups.

Repairability and refurbishment

Because downtime for systems or industrial trucks can entail considerable costs, the products of the KION Group are designed to give customers maximum possible operational readiness. In the event of a stoppage, technicians must be able to access the point of repair rapidly, so straightforward and safe access is essential. A high degree of repairability and durability are important principles for the KION Group and form the core basis of the aftersales business model.

There is no established rating system for the repairability of products and systems of the KION Group. However, a high level of repairability is an important factor in their sustainability. This is reflected in a number of indicators, such as the long availability of spare parts, customized service agreements, and modular product construction. The speed of accessing the point of repair, the ease of disassembly with standard tools, and the option to install software upgrades and updates help to ensure that repairs can be made rapidly. These measures mean that products and systems can be used for a long time, thereby saving resources.

The longevity and repairability of KION Group products, particularly industrial trucks, allow them to be refurbished at the end of their first customer deployment. This provides the option of reusing them as rental or used trucks. 

Recycling

The use of iron and steel in KION Group products ensures a high level of recyclability. Plastic components and lithium-ion batteries are a further major source of recycling potential. Steps have already been taken to improve the recycling process for lithium-ion batteries.

Metrics on resource inflows and outflows

The reported metrics for resource inflows and outflows are based on specific methods and significant assumptions, and, where applicable, on the estimates and outcome uncertainties presented below.

The main source of data for determining the ‘Overall total weight of used products and technical and biological materials (including packaging)’ metric is an internal database, which directly interfaces with the KION Group’s accounting systems and is based on primary data such as invoices. If no direct data is available, figures are extrapolated on the basis of average purchases of materials. Only purchase data for materials from outside the Group is used in the calculation. Movements of materials within the Group are not included. Procurement spending that does not directly contribute to the consumption of materials, such as travel expenses or services, is not included in the calculations.

The overall total weight for the Industrial Trucks & Services segment was extrapolated on a linear basis using the data available. This calculation involved the use of proportionally available procurement data as well as a pro rata projection combined with a benchmark (kg per industrial truck) based on the KION Group’s order intake data. For the Supply Chain Solutions segment, the weight of procured materials was determined on the basis of an analysis of material groups due to a lack of available data. Owing to the similarity of the material groups in the two segments, an ITS benchmark based on the ratio of weight to procurement costs (kg per euro) was used for the segment and extrapolated to a total weight for SCS.

The overall total weight of products and technical and biological materials used (including packaging) includes all KION Group entities subject to disclosure requirements. The base data only takes external procurement data into account. Intragroup supply relationships were not included to avoid double counting. All resource-relevant procurement categories are covered. Net material weight is used. The biological materials used in the manufacture of KION Group products were deemed not to be relevant, as an analysis of the procurement data concluded that the total amount was below the defined materiality threshold.

A degree of measurement uncertainty in this metric stems from the lack, and sometimes insufficient quality, of weight data stored in the procurement systems. Where an Operating Unit does not have specific weight data, average figures from comparable Operating Units with a similar product portfolio are used and extrapolated on the basis of procurement spending.

No complete data from the upstream value chain is available for the ‘Weight of secondary reused or recycled components and intermediary products used in production’ metric. The KION Group therefore used secondary data from internationally recognized sources. For steel and iron, which represent the largest proportion of purchased materials, average global recycling input rates for iron and steel are used. These are obtained from the recycling atlas of the German Mineral Resources Agency (DERA) at the Federal Institute for Geosciences and Natural Resources (BGR).

The recycling input rate of other materials was not included in this metric in the financial year, but there are plans to do so in the future. As part of a pilot project, data was requested directly from suppliers; however, the response rate was too low to make reliable assertions regarding the KION Group’s recycling input rates. In addition to steel and iron, the KION Group plans to systematically assess other material groups over the coming years and determine the relevant average values. Until then, a conservative recycling input rate of zero is assumed for the materials used, as no reliable reference data is available. For more information regarding substances of very high concern in the materials used, see chapter ‘Metrics related to substances of very high concern’.

The calculation of the ‘Proportion of recyclable products and their packaging’ metric is based on the total weight of materials used. [[The recyclability was calculated on the basis of a global average figure for steel and iron contained in the OECD report ‘Global Material Resources Outlook to 2060’ (Publications | OECD).]] This average figure is also used in the highly respected DERA recycling atlas.

There is a degree of measurement uncertainty in the ‘Weight of reused or recycled secondary components and materials used in production’ and ‘Proportion of recyclable products and their packaging’ metrics as no data from the upstream value chain is available. Consequently, the DERA recycling atlas was used to source the average global values for both metrics, in particular for steel and iron as essential purchased materials.

Metrics on waste generated

The KION Group is a mechanical engineering company, most of whose waste is in the scrap metal waste stream. In 2024, another substantial amount came from the foundries. Packaging waste such as wood was also generated.

Data on waste volumes is collected at the relevant KION Group sites. Where direct measurement on site is not possible, the amount of waste is primarily based on estimates drawing on waste disposal documentation, waste amounts from previous years, and the experience of those in charge of local waste management. The estimation of waste volumes is always based on a standardized Group specification.