COFCO International kicks off climate strategy development
COFCO International is partnering with South Pole, the world's leading climate solutions provider and carbon project developer, to build a climate strategy. This will allow the company to fully understand the climate-related impacts of its operations and supply chains, reduce its greenhouse gas emissions and focus on low carbon and more sustainable food production.
It is estimated that agriculture, forestry and other land use activities (AFOLU) combined are responsible for 22% of global anthropogenic greenhouse gas (GHG) emissions, while half of total AFOLU emissions can be attributed to deforestation. The pressure is growing with the rising global population and demand for food, as well as with the growingly visible effects of climate change across the globe.
COFCO International, as an influential agribusiness, understands its responsibility towards the global community and wants to join forces with other actors to proactively pursue a transition to a low carbon business model. Contributing to such a transition is a herculean task for corporations with a global footprint like COFCO International. Nonetheless, it is imperative that businesses across all sectors tackle this challenge in a coherent, scientific and unbiased way.
On the one hand, it is important that companies have a complete and clear picture of how their business models and activities directly or indirectly contribute to exacerbating climate change. At the same time, it is crucial that each company is well-informed about the risks that may disrupt its activities, and also of the opportunities it might leverage, in both the short- and long-term, under different climate and economic scenarios, as informed by science. Corporations can only develop sound emission reduction strategies, including setting science-based targets, that allow them to do their part in effectively tackling climate change when they have such an overview.
“Developing a comprehensive climate strategy brings a number of benefits for a company,” says Julia Moretti, Global Head of Sustainability at COFCO International.
Fully understand your footprint
In order to set meaningful targets, it is important to have a view on the baseline scenario, which is why COFCO International started with a complete inventory of its GHG emissions in 2021. It is a complex task, because the company needs to look at its footprint beyond its own operations, including the impact of its value chains (called scope 3 emissions). Accurate data is not always readily available. Measuring the footprint helps to pinpoint the areas with the highest emissions, to focus on.
As a second step, COFCO International is applying scenario analysis to understand the risks and opportunities that climate change poses to its business. The objective of this exercise is to understand the vulnerabilities of operations and prepare a proper response.
“Once we understand how COFCO International is impacting the climate and how climate change is impacting COFCO International, we will work on mapping out possible interventions and a strategy with targets to help us improve performance and monitor our progress,” Moretti says. “In short, by understanding our footprint, we can compare and improve our performance by identifying specific areas with higher emissions, and in turn ensure that our business is doing its part in what needs to be done in terms of climate action.”
Calculate and reduce
The company has already taken steps to create an internal system for corporate GHG emissions measurement and monitoring and trialled a few commodity-specific carbon footprint projects. For the last five years, it has consistently reported GHG emissions for scope 1, 2 and 3, with the boundaries for scope 3 limited to energy-, fuel-, and freight-related emissions.
The collaboration with South Pole is the next step in a journey towards better understanding and analysing the relationship between the climate and COFCO International’s operations and value chains. This approach allows COFCO International to take the right steps needed to achieve its objectives, in cooperating with its partners.
“We aim to help COFCO International make smart business decisions based on climate insights,” says Akash Arasu, Managing Consultant at South Pole. “Our analyses are grounded in science, relying on primary data provided by COFCO International and sector-specific averages. The results provide data points on which to build a strong business case for decision-making.”
The project with South Pole is fully funded by the margin savings from COFCO International’s sustainability-linked loans, the most recent of which, worth $1.6 billion, was signed in July. Sustainability-linked loans require a high degree of proof and assurance of the associated social and environmental targets, and details of companies’ sustainability practices, sourcing policies, suppliers, due diligence carried out and commitments over a horizon of three to five years.
Roadmap to climate targets
At the 26th UN Climate Change Conference of the Parties (COP26), COFCO International, together with 11 major agri-commodity companies, committed to define a sector roadmap for enhanced supply chain action consistent with a 1.5 degrees Celsius pathway. It has committed to a soy supply chain free from conversion and deforestation in the sensitive biomes of Amazon, Cerrado and Chaco, and furthermore, is aligned with the International Maritime Organization's decarbonisation trajectory for shipping. It is also linking its credit facilities to its performance with sustainability-linked loans.
COFCO International has a complex value chain, with around 133 million tonnes of agricultural products traded annually and some 200 vessels on the water at any given time. The data collection for an in-depth risk assessment and for a thorough inventory of emissions from direct and indirect sources, including scope 3 categories, is therefore an extremely complex undertaking.
There are added challenges from the wide variety of commodities that COFCO International sources around the world, from areas with different climate risks and risk levels, each of which needs to be diligently assessed and monitored.
With South Pole's expertise and experience in the sector, the company hopes to navigate the complexities and build a robust internal system that will serve in the years to come.
“COFCO International believes in the power of collective action to speed up decarbonisation and climate action,” Moretti says. “With our climate strategy, we aim to help the company become a leading climate resilient business in the long run and make a positive contribution to the decarbonisation of agricultural value chains.”