Disclosure of information based on TCFD Recommendations
In April 2022, the FEED ONE Group expressed its support for the recommendations of the TCFD (Task Force on Climate-related Financial Disclosure) and has been actively promoting disclosure using the framework recommended by the TCFD in order to realize the decarbonized society (a society that strives to limit the global average temperature increase to 1.5°C, well below the 2°C level before the industrial revolution) that the Paris Agreement aims for.
Governance, Strategy, Risk Management, and Indicators and Targets, as recommended for disclosure in the TCFD Recommendations, The results of the scenario-based analysis are disclosed in the TCFD report.
We will continue to enhance information disclosure and further accelerate the Group's sustainable growth and climate change initiatives.
Governance
The FEED ONE Group set up the ESG Committee to promote ESG/SDGs initiatives. The ESG Committee considers and discusses the Group’s issues and measures related to ESG including climate-related risks and opportunities and human capital. The Committee has also set the Group’s targets for ESG/SDGs linked with the Medium-term Management Plan and business plan, provides support and advice on the initiatives, and manages their progress.The Committee adopts a cross organizational structure chaired by the Representative Director and President,
and persons responsible for each of the business and administrative departments and departments reporting to the President are appointed as members of the Committee. The Board of Directors regularly receives reports from the ESG Committee on ESG/SDGs including climate-related risks and opportunities and human capital, and provides supervision and advice on such measures.
Strategy
The FEED ONE Group considers addressing climate changes as the management’s top priority, and analyzed the scenario in 2030 to understand the financial impact of climate changes.
In the scenario analysis, we made reference to several scenarios issued by the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC).
●The FEED ONE Group’s climate-related scenarios
| Classification | Outline of scenarios | Main referenced scenarios |
|---|---|---|
| 1.5°C and well-below 2°C scenario |
A scenario in which policies and regulations are implemented toward achieving a decarbonized society, and the global temperature will be controlled at around 1.5°C to well-below 2°C above the pre- industrial levels |
・IEA World Energy Outlook 2022「NZE」 ・ IEA World Energy Outlook 2022「SDS」 ・ IPCC SSP 1-2.6 ・ IPCC RCP 2.6 |
| 4°C scenario: | A scenario in which no new policies and regulations are introduced to address climate changes, and the global temperature will rise about 4°C above the pre-industrial levels |
・IEA World Energy Outlook 2022「STEPS」 ・ IPCC SSP 5-8.5 ・ IPCC RCP 8.5 |
●Results of scenario analysis and relevant measures
| Magnitude of financial impact | High: Impact on profit and loss is over 500 million yen or a material impact on business operation Moderate: Impact on profit and loss is over 100 million yen but 500 million yen or less or a somewhat significant impact on business operation Low : Impact on earnings is 100 million yen or less |
|---|---|
| Timeframe | Short : Within five years Medium: Over five years but within 10 years Long : Over 10 years |
| Classificatio | Risks/opportunities | Magnitude of financial impact | Timeframe | Measures for risks and opportunities | ||
|---|---|---|---|---|---|---|
| Beyond 1.5/2°C | 4℃ | |||||
| Transition risks | Policy and regulation | Rising cost by a carbon tax implementation |
High | High | Medium | ■Initiatives to reduce CO2 emissions (Scopes 1 and 2) ・Install more energy-saving equipment to factories ・Renovate aging factory facilities Reduce energy consumption by improving productivity by leveraging IoT technology ・Install solar photovoltaic equipment to factories and offices ■Initiatives to reduce carbon tax cost in the supply chain Animal feed: Increase bulk-loading of formula feed, and reduce disassembling of used flexible container bags at factories Aquatic feed: Consider use of a plastic feed bag which contains recycled plastic materials Food business: Continue using pulp mold for commercial egg products, and reduce the consumption of plastic packaging materials used in meat processing |
| Reputation | Declining profit due to a shift in demand toward sustainability-conscious,plant-based meat, etc. | Low | Low | Long | ・R&D of feed with reduced environmental impact ・Branding of environmentally friendly livestock products by promoting sale of livestock products fed with feed with lower environmental impact |
|
| Physical risks | Acute | Physical damage to livestock farmers and farms due to natural disaster, and a decrease in feed sales volume from a disruption of distribution network |
Low | Low | Short | ■Measures for producers Animal feed: Minimize damage by developing disaster response measures at production sites Aquatic feed:Gathering information on wave-tolerant aquaculture facilities and developing feed for these facilities ■Measures to prevent disruption of distribution network Establish a system to have alternate supply routes based on the business continuity plan |
| Suspended factory operation due to a natural disaster |
Low | Low | Short | Minimize damage by developing business continuity plans and conducting drills | ||
| Chronic | Impact on livestock and farmed fish by a rise in temperature and sea water temperature, and a decline in feed sales volume due to a change in optimal production location in Japan |
Low | Moderate | Long | Animal Feed : Collection and dissemination of information on equipment and husbandry management techniques that are undergoing technological innovation Aquatic Feed: We will conduct R&D on low fish meal and fish meal-free feedInvestigate development of products for fully closed-loop land-based aquaculture, for which demand is expected to increase. |
|
| Declining profit due to the impact on raw material production/cost caused by climate changes |
High | High | Long | ■Active use of raw materials with good price and quality advantage Animal Feed : To diversify the risk of material procurement and price fluctuation for animal feed, we will import from various countries, and actively use domestic raw materials as alternatives to imported materials, such as feed rice whose production is increasing in recent years. Aquatic Feed: We will conduct R&D on low fish meal and fish meal-free feeds to promote switching of materials. We will also build a system to respond flexibly by enhancing collaboration with fish meal producers in and outside Japan, while monitoring the supply condition of producers. ■Appropriate price revision Animal Feed : Continue quarterly revision of the sales prices to an appropriate level Aquatic Feed: Sales prices will be revised to reflect changes in raw material cost, though not regularly. |
||
| Opportunities | efficiency Resource |
Reduce energy consumption by efficient production based on IoT technology |
Low | Low | Medium | We improved the energy efficiency of the Kitakyushu Animal Feed Factory by 17%, while improving its productivity by controlling the electricity and steam amount of each process, and reducing energy consumption. Implement IoT technology at all factories to further improve energy efficiency |
| Products and services | An increase in feed sales volume by development and sales of sustainable feed and use of sustainable raw materials |
Moderate | Moderate | Short | ■Animal feed : We will develop and sell products that will improve the feed conversion rate of livestock and the feed to reduce manure. Develop products ahead of other companies such as developing feed to reduce methane emission from cattle to increase the sales volume of feed ■Aquatic feed: We are developing low fish meal and fish meal-free feeds, and started sale of low fish meal feed for some fish species. Use of insect-derived materials, algae, and methanotroph may be costly, and limited in volume. However, we will work towards implementing them ahead of other companies to increase the sales volume of feed. |
|
| An increase in feed sales volume due to advanced technology to prevent heat stress of livestock |
Moderate | Moderate | Short | We have developed and sold feed and supplements to prevent heat stress, which has largely contributed to improving livestock productivity. We will further focus on R&D, continue gathering information on feed management technology and provide services. |
||
●Impact of a Carbon Tax Introduction
We have considered the following two types of the Scopes 1 and 2 emissions, covering the Company and three subsidiaries and associates with high CO2 emissions.
In the 1.5°C scenario, if the Group does not address the reduction in CO2 emissions and such emission increases in line with growing business activities, the carbon tax amount in FY2030 will amount to approximately 600 million yen.
Meanwhile, if the Group could reduce CO2 emissions by 50% in FY2030 (vs. FY2020 levels) as planned, carbon tax amount will decrease by approximately 230 million yen to approximately 370 million yen.
Cost related to CO2 emissions reduction is not included.
b. If the Group reduced CO2 emissions by 50% in FY2030 (vs. FY2020)
| Type | 1.5℃ scenario | 4℃scenario | Calculation method |
|---|---|---|---|
| a | 605 | 417 | Calculate by multiplying a carbon tax* rate to FY2030 CO2 emissions which was adjusted with a business growth rate |
| b | 371 | 239 | Calculate by multiplying a carbon tax* rate to the CO2 emissions in FY2030 when the emissions are reduced by 50%,and after adjusting with a business growth rate |
- *Carbon tax: 1.5°C scenario $140/t-CO2 (Refer to IEA World Energy Outlook 2022 “NZE” for advanced economies)
4°C scenario $90/t-CO2 (Refer to IEA World Energy Outlook 2022 “STEPS” for EU)
Calculated at 140 yen to the US dollar
Risk Management
- 1Process to identify and assess climate-related risks
Task Force on TCFD under the ESG Committee identifies climate-related risks and opportunities in light of internal and external factors.
For the identified climate-related risks and opportunities, we will utilize the system/framework (process, metrics) adopted under the enterprise risk management (ERM) regulations to analyze and assess the quantitative and qualitative impact on the Group and develop measures. - 2Process to manage climate-related risks
The ESG Committee will monitor measures taken for climate-related risks and opportunities, improve measures for such risks and opportunities by checking their appropriateness, and report important matters to the Board of Directors.
The Board of Directors supervises and advises on the measures for climate-related risks and opportunities which are reported by the ESG Committee.(Figure 1) Process to identify, assess, and manage climate-related risks and opportunities
- 3 Integration of the process to identify, assess, and manage climate-related risks into overall risk management
We have established the ERM regulations, and undertake risk management mainly at company-wide risk management (RM) meetings.
We have set up 57 promotion teams in total nationwide, and implement the PDCA cycle of risk management through the year. (Figure 1)
On climate-related risks, the Task Force on TCFD and company-wide RM meetings will collaborate together and manage overall risks to minimize group-wide risks and maximize opportunities. (Figure 2)(Figure 2) Collaboration between the ESG Committee and company-wide RM meetings
Metrics and Targets
The Group has set CO2 emissions as key metrics to minimize risks and maximize opportunities related to climate change, and set the medium-term to long-term targets for FY2030 and FY2050.
We have started various initiatives to achieve the reduction targets, and firstly set three reduction measures to
achieve the medium-term targets: (1) energy-saving and energy-generating activities, (2) switch to renewable energy electricity, and (3) carbon offsets with avoided emissions. We then prepared a decarbonization roadmap by taking account of increased emissions due to business growth until the target fiscal year of 2030.
Medium-term targets (FY2030) : Scopes 1 and 2 CO2 emissions 50% reduction vs. FY2020 levels
Long-term targets (FY2050) : Achieve carbon neutrality in entire supply chains
< CO2 Emission Results >
| Target scope | FY2020 | FY2021 | FY2022 | ||
|---|---|---|---|---|---|
| Scopes 1 and 2 | |||||
| Emissions (Scopes 1 and 2) YoY |
— | 40,774 - |
40,664 (0.3%) |
43,914 (+8.0%) |
|
| Scope 1 | FEED ONE and its major subsidiaries and associates (factories) | 14,435 | 15,347 | 18,739 | |
| Scope 2 | (Heat) | FEED ONE and its major subsidiaries and associates (factories) | 2,280 | 1,108 | 820 |
| (Electricity) | FEED ONE and its major subsidiaries and associates (factories) | 24,059 | 24,209 | 24,356 | |
| Scope 3 | |||||
| Emissions YoY |
— | 1,420,061 - |
1,784,969 (+25.7%) |
1,860,584 (+4.2%) |
|
| Category 1 [Purchased goods and services] | FEED ONE (purchased raw materials) | 1,418,931 | 1,783,749 | 1,859,445 | |
| Category 5 [Waste generated in operations] | FEED ONE (factories and Research & Development Center) and its major subsidiaries and associates (factories) |
724 | 782 | 688 | |
| Category 6 [Business travel] | FEED ONE (Head Office) | 71 | 78 | 104 | |
| Category 7 [Employee commuting] | FEED ONE | 336 | 359 | 346 | |
- *FEED ONE and its major subsidiaries and associates (factories)
- *Due to the change in the calculation standard (target energy categories) from the "Energy Conservation Law" to the "GHG Protocol," the figures for FY2020 and FY2021 have been revised.
- *Figures in parentheses are in comparison with the previous year.
- *Totals may not add up due to decimal points
< decarbonization roadmap >
< CO2Emission Reduction Efforts >
- A system to effectively use some waste heat produced
when generating electricity with liquefied natural gas to
improve energy efficiency upon steam generation.
- < Quantitative effect >
- CO2 emissions: ca. 200 t-CO2/year reduction
- LED lighting from conventional mercury lamps, etc.,
is converted to LEDs, resulting in energy savings.
Emissions, in addition to reducing energy consumption
through energy-saving effects.
- < Quantitative effect >
- CO2 emissions: ca. 82 t-CO2/year reduction