Introduction
This report reflects our most recent scenario analysis aligned with the Task Force on Climate-related Financial Disclosures (TCFD)1 and our work to advance our goal to reach net zero greenhouse gas (GHG) emissions across our value chain by 2040.
References in this report to “we,” “our,” “us,” and similar terms refer to Cisco.
Governance
Board oversight
The highest level of oversight for climate-related issues resides with the Environmental, Social, and Public Policy (ESPP) Committee of Cisco’s Board of Directors. The ESPP Committee is responsible for overseeing Cisco’s initiatives, policies, programs, and strategies concerning environmental sustainability and other key corporate social responsibility and public policy matters. The Board receives regular updates from the Chief Sustainability Office and other management on Cisco’s overall Corporate, Social Responsibility, and ESG strategy and the progress we are making under it.
Management’s role
Building further on its strong foundation of climate change initiatives and goals that began nearly two decades ago in 2006, Cisco’s first Chief Sustainability Officer (CSO) was named in 2022 and is responsible for executing the enterprisewide sustainability strategy, stewarding sustainability initiatives across Cisco, and driving progress toward its goals.
Cisco’s People, Policy, and Purpose organization leads our social investment programs and champions our commitment to ESG performance and transparency. In addition, Cisco has several crossfunctional committees which oversee various ESG initiatives and help implement our strategy, including environmental initiatives and strategies. A core reporting team is responsible for supporting the CSO and our enterprisewide sustainability initiatives, setting and driving an environmental sustainability reporting strategy, engaging internal and external stakeholders, and researching and monitoring environmental sustainability trends.
Business functions are also responsible for certain ESG priorities, which align with the enterprisewide sustainability strategy. Business function management teams set goals, implement plans, and measure performance to integrate identified priorities into the business strategy.
Strategy
Climate change and GHG are high-priority topics among our stakeholders and are long-term strategic priorities for Cisco–not just to manage related risks, but also to help enable the transition to a low-carbon future. Building upon nearly two decades of setting and achieving emissions goals, in September 2021, we set an ambitious long-term goal to reach net zero across our value chain (Scope 1, Scope 2, and Scope 3 emissions) by 2040, which has been validated by the Science-Based Targets initiative (SBTi) under its Net-Zero Standard. Cisco is one of the first technology hardware and equipment companies to have its net zero goal validated under the SBTi Net-Zero Standard.
Our strategy to achieve our net zero goal includes:
- continuing to increase the energy efficiency of our products through innovative product design;
- accelerating the use of renewable energy, including in the communities where our suppliers and customers operate;
-
further embedding sustainability and circular economy principles across our business, including:
- incorporating the circular economy principles of reuse and resource efficiency into how we design, source, make, deliver, and take back products;
- collaborating with manufacturing, component, and logistics suppliers to manage and report GHG reduction targets, influencing improvements in performance year-over-year; and
- evolving our business models to support multiple product lifecycles;
- embracing hybrid work; and
- investing in innovative carbon removal solutions.
Risks, Opportunities, and Scenario Analysis
To better understand our climate-related risks and opportunities, and to help inform our strategy, we conducted an enhanced scenario analysis in 2023. This analysis examined two scenarios, a “low-carbon economy” (LCE) and a “high-carbon economy” (HCE) scenario, and we modeled them against future time horizons, including 2030 and 2040.
The HCE scenario represents inaction with respect to decarbonization, or a 4-degree Celsius temperature rise by the end of the century, while the LCE scenario represents a climate scenario aligned with a 2-degree Celsius temperature rise by the end of the century.
| LCE: Low-carbon economy scenario | HCE: High-carbon economy scenario | |
|---|---|---|
| Assumed degrees of warming | LCE: Low-carbon economy scenario: Below 2°C by end of the century. | HCE: High-carbon economy scenario: 4-5°C by end of the century |
| Scenario |
LCE: Low-carbon economy scenario:
Transition risks and opportunities: Network for Greening the Financial System (NGFS) Below 2°C scenario. Physical risks: IPCC SSP-1, RCP2.6 |
HCE: High-carbon economy scenario:
Transition risks and opportunities: NGFS Current Policies scenario. Physical risks: IPCC SSP-5, RCP8.5 |
To identify and model risks and opportunities, we considered both quantitative and qualitative factors. The physical assets selected for the physical risk analysis were prioritized based on a number of attributes, including location, to help identify the significance of the asset to the enterprise. For transition risks and opportunities, crossfunctional surveys and internal interviews were also considered.
Physical risks
Our analysis of physical risks focused on identifying potential impacts from climate-related physical hazards facing Cisco assets located worldwide, including Cisco-owned and leased facilities, logistics centers, data centers, contract manufacturers, and suppliers.
For each asset location, data was collected and processed to include in the physical risk modeling. Physical climate risk was quantified using the outputs of global climate models for historical baseline periods and for future periods using two scenarios aligned with Shared Socioeconomic Pathways (SSP1-2.6 and SSP5-8.5).
| Physical Risks | Nature of Risk | Potential Impact Examples |
|---|---|---|
| Physical Risks: Business disruptions due to climate disasters | Nature of Risk: Acute |
Potential Impact Examples:
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| Physical Risks: Business disruptions due to long-term climate shifts | Nature of Risk: Chronic |
Potential Impact Examples:
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Transition risks and opportunities
The quantitative analysis of transition risks and opportunities compared Cisco’s stated net zero goals and related pathway to global LCE and HCE scenarios for multiple future time horizons. The analysis focused on stress-testing Cisco’s net zero goals against these scenarios, as well as assessing the potential financial impacts of the three transition risks and two opportunities below on Cisco’s business.
Decarbonization pathways, internal data, market projections, and potential financial exposure and losses were modeled to understand Cisco’s overall transition risk profile, risk hotspots, and financial implications.
| Transition risks | Risk category | Potential impact examples |
|---|---|---|
| Transition risks: Cisco investment in product decarbonization | Risk category: Technology |
Potential impact examples:
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| Transition risks: Customer preferences for low-carbon products | Risk category: Technology and market |
Potential impact examples:
|
| Transition risks: Delayed grid decarbonization (or delayed adoption of clean energy sources) | Risk category: Technology |
Potential impact examples:
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| Opportunities | Opportunity category | Potential impact examples |
|---|---|---|
| Opportunities: Develop new sustainable product models | Opportunity category: Products and services |
Potential impact examples:
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| Opportunities: Position Cisco as a trusted climate partner | Opportunity category: Markets |
Potential impact examples:
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Risk management
Cisco manages climate-related risks to our employees and assets through our risk management teams. For example, within our supply chain risk management function, Cisco monitors global climate-related hazards and determines the potential impact across the value chain, including impacts to Cisco’s employees, physical assets, suppliers, and operations using internal risk assessment tools.
Cisco’s established Enterprise Risk Management (ERM) program works across the organization to identify, assess, govern, manage, and respond to risks, including climate-related risks. Cisco’s Board of Directors and its various committees oversee risks to the enterprise and receive a regular cadence of updates from the ERM Operating Committee.
While Cisco’s management is responsible for the day-to-day risk management activities within the organization, the Board of Directors is responsible for the overall oversight of Cisco’s risk management. The Board of Directors has implemented practices, processes, and programs designed to help manage risks to which our business is exposed to and align risk tolerance appropriately. This TCFD-aligned climate risk scenario analysis provides a macro view of Cisco’s climate change risks and opportunities, focused on physical and transition risk categories across our operations and the market. Through our ERM process, we embed these findings and larger trends into our broader ERM program to monitor and develop a plan to mitigate the identified physical and transition risks and capitalize on opportunities.
Metrics and targets
The primary metric we use for Scope 1, Scope 2, and Scope 3 emissions reduction reporting and progress is metric tons of carbon dioxide equivalents, and we are reporting the progress we are making on our net zero goal through the following near-term targets:
- Reduce absolute Scope 1 and Scope 2 emissions 90 percent by 2025;2,3 and
- Reduce absolute Scope 3 emissions from purchased goods and services, upstream transportation and distribution, and use of sold products by 30 percent by 2030.4
We track and report progress on our interim targets annually on our Purpose Reporting Hub.
Cisco also discloses an overview of our operational energy consumption, annual water usage, and waste generation and management as part of the ongoing initiatives to minimize the environmental impact caused by day-to-day activities. More information about our environmental footprint is available here.
Looking ahead
As a result of our 2023 quantitative climate risk scenario analysis, we continue to develop a deeper understanding of the impacts climate change will have on our business and our people. We believe effective climate risk management strategies will be important in our long-term sustainability and business strategies.
We will continue to assess emerging climate-related risks and opportunities and integrate climate-risk management responsibility into roles within our business. We remain focused on our 2025 and 2030 near-term targets and our 2040 long-term, SBTi-aligned net zero goal, and we are dedicated to advancing sustainability within our business so we can continue to Power an Inclusive Future for All.
1 Concurrent with the release of its 2023 status report on October 12, 2023, the TCFD has fulfilled its remit and disbanded. The Financial Stability Board (FSB) asked the International Financial Reporting Standards (IFRS) Foundation to take over the monitoring of the progress of companies’ climate-related disclosures.
2 Compared to fiscal 2019. We intend to neutralize the remaining 10% of emissions by removing an equal amount from the atmosphere.
3 We continue to make strides towards this fiscal 2025 goal. However, like other companies with ambitious targets, we are facing headwinds. Regardless, we will continue to drive meaningful action and innovate toward our goals.
4 Compared to fiscal 2019. The baseline and progress reported for our 2030 goal includes: purchased goods and services from manufacturing, component, and warehouse suppliers; upstream transportation and distribution from Cisco purchased air transportation; and use of sold products.