NISSIN FOODS GROUP

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Responding to Climate Change and Water Risks

Climate Change Risk

The NISSIN FOODS Group, which is made up of companies that manufacture food products, is affected by the various impacts arising from climate change, such as sharp increases in raw material prices, damage to production plants, and changes in consumer purchasing trends. Climate change is therefore positioned as one of our important management risks.
At NISSIN FOODS HOLDINGS, we support the disclosure of information related to governance, strategy, risk management, and metrics and targets as given by the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) established by the Financial Stability Board*1. At the same time, we participate in the TCFD Consortium*2 established in May 2019.

  • *1An organization made up of central banks and financial regulatory authorities of major countries
  • *2The TCFD Consortium discusses initiatives including effective corporate information disclosure by companies that support the recommendations of the TCFD, and measures that contribute to appropriate investment decisions, mainly by financial institutions, using disclosed corporate information.

Measures by the NISSIN FOODS Group regarding disclosure items recommended by the TCFD

Governance The Group recognizes climate change matters as an important management issue. The Sustainability Committee, which is chaired by the CEO, examines various measures to tackle environmental issues, including climate change factors that bring about risks and opportunities to the Group. In FY2020, the Group established the environmental strategy, EARTH FOOD CHALLENGE 2030. Following a meeting of the Management Committee, this strategy was reported at a meeting of the Board of Directors.
In addition, the Sustainability Advisory Board was established as an advisory body to the Board of Directors in April 2021 to create opportunities for management to discuss ESG themes affecting the Group with external experts. The contents of discussions are disclosed externally and will also be reflected in our management policies and various measures.
Strategy EARTH FOOD CHALLENGE 2030 contains numerical targets for CO2 emissions, water usage and waste, based on the results of the climate change scenario analysis implemented in FY2020. The Group strives to alleviate climate change risks by working to achieve targets. In addition, we aim to create business opportunities by conducting initiatives, such as promoting the use of vegetable, alternative meat, the development of cultured meat, and the development of low environmental impact raw materials.
Risk Management The Group established the Risk Management Committee, which is under the management of the Board of Directors. The committee grasps the management conditions of various risks, including environmental risks. The Group is undertaking measures to circumvent the erosion of our corporate value.
Metrix and Targets The EARTH FOOD CHALLENGE 2030, the Group’s environmental strategy, sets greenhouse gas reduction targets; a 30% reduction in Scope 1 and 2 emissions, and a 15% reduction in Scope 3 emissions by 2030 (compared to FY2019). In addition, there are targets for waste reduction, raw materials procurement and water usage. For more information, please see the special page.
NISSIN FOODS Group EARTH FOOD CHALLENGE 2030 environmental Strategy
  • * Scope 1: Direct emissions from owned or controlled sources
    Scope 2: Indirect emissions from the generation of purchased electricity, heat or steam energy
    Scope 3: All indirect emissions (not included in Scope 1 or Scope 2) that occur in the value chain

Climate change scenario analysis

At the NISSIN FOODS Group, we implemented a scenario analysis that factors in TCFD recommendations released in 2017 by launching a project team to grasp the impact of climate change on business activities.
We identified the transition and physical risks* from climate change to raw material procurement to plant operations and product manufacturing. We focused analysis on climate change related risks that strongly impact our businesses. Based on the result of this analysis, we determined that there is little possibility that risks associated with the procurement of major raw materials will hinder the Group's medium-to-long term growth. Meanwhile, in the event of a rise in carbon tax due to tighter emissions regulations on greenhouse gases (GHG), we found there is potential of substantial impact to the Group's earnings.

  • *Transition risk:Risks brought about by changes triggered in tandem with a shift to a low-carbon economy, including the introduction of a carbon tax.
    Physical risk:Risks brought about by natural disasters, including flooding and drought
Anticipated scenarios

Based on reports by the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA), we have formulated three post-2030 scenarios and analyzed their respective risks and opportunities.

Anticipated scenario Anticipated world view
1, Global acceleration toward net zero emissions
(Success in suppressing global temperature rise through widespread introduction of regulations: global temperature rise anticipated at 1.5°C or 2°C above levels prior to the industrial revolution)
Society as a whole works toward decarbonization and succeeds in suppressing global temperature rise, including the tightening of regulations related to carbon tax and plastics, changes in the structure of the capital market due to expansion of green financing, and expansion of ethical consumption
2, Unable to suppress global temperature rise even though GHG emission regulations are tightened
(Global warming continues even though various regulations are tightened: global temperature rise anticipated at 4°C above levels prior to the industrial revolution)
Climate change mitigation is not achieved even though emission regulations are tightened such as through the introduction of carbon tax and carbon border tax, with pressing need to respond to both transition and physical risks
3, GHG emission regulations are not tightened and global temperature rise prevails
(Global warming continues due to limited regulations: global temperature rise anticipated at 4°C above levels prior to the industrial revolution)
Regulations are limited and there are frequent occurrences of natural disasters due to global warming, with increasing risk of business interruptions as well as impact on people’s opportunities to obtain food
Correlation between anticipated scenarios and risks
The measures (adaptation) below are taken for each anticipated scenario for the entire NISSIN FOODS Group (including new businesses). In addition, we will also conduct short-term, medium-term, and long-term monitoring to verify the results of measures.

1, Global acceleration toward net zero emissions*

Anticipated impact on the NISSIN FOODS Group
Society transforms into a disciplined society with economic activities focused on decarbonization and low-carbon becoming more vibrant. Due to the tightening of regulations regarding carbon emissions by national governments, the Group’s scope of responsibility in the environmental field expands to the overall value chain, and costs required for responses to regulations and research and development are expected to increase. In addition, rising environmental awareness leads to changes in consumer behavior and is expected to also affect the Group’s sales.
  • *Success in suppressing global temperature rise through widespread introduction of regulations (global temperature rise anticipated at 1.5°C or 2°C above levels prior to the industrial revolution)

<Adaptation>

[Procurement]
Governments tighten regulations and requirements for decarbonization in raw material production. To further advance raw material procurement that gives consideration to the environment and human rights, the Group will provide support to agricultural producers for the development of technologies that contribute toward low carbon (such as soil modification and cultivation methods) and improvement of working environments. In addition, we will build engagement between the Group and suppliers.
[Production & logistics]
Corporate activities depending on petroleum are pressured to change through taxation by carbon pricing, regulations on petroleum-derived raw materials such as plastics, and other measures. The Group will promote the reduction of plastic container and packaging during production design, wider adoption of biomass materials, energy-saving measures at manufacturing plants, and use of renewable energy. Consideration will also be undertaken toward the introduction of environmentally friendly manufacturing facilities that use new technologies, such as hydrogen energy.
In addition, we will also strive to build an efficient logistics system, such as adopting modal shift and switching to electric vehicles and reduction of transportation CO2 emissions through local production for local consumption.
[Sales]
Consumer behavior and awareness change, including rising awareness of ethical consumption and dislike of petroleum-derived packaging. The Group will promote the adoption of environmentally friendly containers that use biomass plastics as well as aim to enhance environmentally friendly products such as through the use of plant-derived meat alternatives.

2, Unable to suppress global temperature rise even though GHG emission regulations are tightened*

Anticipated impact on the NISSIN FOODS Group
Climate change mitigation is not achieved even though GHG emission regulations are tightened, and corporate management is pressured such as by physical damage from natural disasters and taxation via carbon pricing. In addition, society and the economy become unstable, and there are significant changes to people’s lifestyles. At the Group, there is rising supply interruption risk at suppliers and production/logistics sites, and at the same time, increased possibility of lower profits is anticipated due to the tightening of regulations.
  • *Global warming continues even though various regulations are tightened (global temperature rise anticipated at 4°C above levels prior to the industrial revolution)

<Adaptation>

[Procurement]
It is expected that yields and production areas of grain, livestock, and seafood resources will change and natural disasters will increase due to the impact of global warming. The Group will build a procurement system that is resilient to disasters by seeking to diversify raw material production and procurement methods (such as distribution of suppliers and rebuilding of the supply network).
[Production & logistics]
As climate change cannot be stopped, international frameworks will exist only in name and physical damage from natural disasters will become more severe. The Group will strengthen our business continuity plans (BCP) in our production and logistics systems.
[Sales]
Consumer thinking and behavior are expected to change, such as avoiding warm products due to the rise in global temperatures. In addition, an increase in the number of heat stroke, infectious diseases and similar ailments is also expected. The Group will generate new demand and create business opportunities such as by proposing products aimed at carbon neutrality and products that can be eaten tastily even when the temperature is hot, providing health-friendly products and services, and expanding the sales channels of instant noodles which are advantageous as emergency stock.

3, GHG emission regulations are not tightened and global temperature rise prevails*

Anticipated impact on the NISSIN FOODS Group
Global warming continues as policies and regulations promoting the move toward low carbon are limited. Rules regarding plastics and waste do not function effectively. It is expected that the increase in occurrences of natural disasters with damage becoming more severe will lead to society and the economy becoming unstable and bring impact on people’s opportunities to obtain food. The Group expects higher risk of supply interruption at suppliers and production/logistics sites arising from the impact of natural disasters.
  • *Global warming continues due to limited regulations (global temperature rise anticipated at 4℃ above levels prior to the industrial revolution)

<Adaptation>

[Procurement]
Due to the impact of global warming, there is higher risk of reduced supply capabilities and interruptions in the overall supply chain. The Group will build a risk-distributed procurement system in anticipation of changes in yields and production areas by seeking to diversify raw material production and procurement methods (such as distribution of suppliers and rebuilding of the supply network).
[Production & logistics]
It is expected that the increase in natural disasters due to the impact of global warming will affect the overall supply chain. The Group will work on promoting local production for local consumption as well as the establishing of plant factories that produce crops indoors. In the manufacturing of products, we seek to scrutinize details of insurance in preparation for physical damage from natural disasters, strengthen BCP including the reduction of water risks, and build a production/logistics system that has high energy efficiency.
[Sales]
Consumer awareness regarding matters such as environmental activities and ethical consumption remain stagnant and there are higher needs for products and services that promote health and prepare for emergencies. We will roll out businesses that focus on products specializing in health functions, such as nutritionally-complete meals.

Impact on business

We report to management, including the CEO, the risks and opportunities caused by climate change to the Group. Given the uncertainties of climate change, we also continue to conduct an analysis and evaluation of the impact to finances on a scientific basis. Furthermore, the EARTH FOOD CHALLENGE 2030, which contains the Group’s environmental targets, was established based on the results of the above analysis. We aim to become a company that mitigates climate change risks and creates opportunities.
After estimating the financial impact of the transition and physical risks found in the three scenarios above, we assess that, for every scenario, financial impact will be minimized by carrying out the measures and it is possible to promote resilient management. However, we will continue to estimate the impact going forward as the transition and physical risks are highly uncertain.

Degree of financial impact from main risks and measures (adaptation) against them

Main risks Responses to main risks (measures to reduce financial impact)
Transition risk Regulations such as carbon tax and carbon border tax Introduction of energy-saving facilities and systems at manufacturing plants
Expansion in the introduction of renewable energy
Sale of environmentally friendly products
Physical risk Water risks (such as floods and droughts) Multi-faceted analysis and investigation of water risks at manufacturing plants and other locations
Efficient use of water at manufacturing plants, such as reusing of water
Changes in raw material suppliers Development of plant-derived meat alternatives and cultured meat products
Development of products that use plant-derived meat alternatives, cultured meat, and other such ingredients
Procurement of sustainable palm oil

Climate change risks with a high degree of impact to the NISSIN FOODS Group

1. Raw materials procurement

For wheat, soybeans, shrimp and squid, which are the major raw materials used in our products, we applied simulation model* results from several research institutes and assessed the change in harvest and catch yields by major production areas (country/region) due to climate change. This scenario analysis employs the Representative Concentration Pathways (RCP) scenario and the Shared Socioeconomic Pathways (SSP) adopted by the Intergovernmental Panel on Climate Change (IPCC) to conduct an analysis under various conditions, including the 2℃ scenario sought by the TCFD. In addition, we also assessed the change in harvest yields due to climate change for palm oil. Accordingly, we determined there is little possibility that risks related to the procurement of major raw materials will hinder the Group's medium-to-long term growth.

*Applied simulations

Wheat National Agriculture and Food Research Organization (NARO) analysis model for “Responses of crop yield growth to global temperature and socioeconomic changes”
United States Department of Agriculture (USDA) analysis model for “Climate Change and Agricultural Risk Management Into the 21st Century”
Soybeans National Agriculture and Food Research Organization (NARO) analysis model for “Responses of crop yield growth to global temperature and socioeconomic changes”
Shrimp and squid Food and Agriculture Organization of the United Nations (FAO) analysis model for “Projected changes in global and national potential marine fisheries catch under climate change scenarios in the twenty-first century. In: Impacts of climate change on fisheries and aquaculture, 63.”
[Wheat and soybeans]
We analyzed impacts up to 2050 and 2100 using three scenarios: RCP2.6 (a forecast rise of around 1℃ based on 1986-2005), RCP6.0 (a forecast rise of around 2℃) and RCP8.5 (a forecast rise of around 4℃).
Based on the results of this analysis, the area unit yield for wheat produced in Australia is expected to increase versus 2000 based on the RCP2.6 and RCP6.0 scenarios. The RCP8.5 scenario also projects an increase up to 2050 but a potential decline thereafter. Meanwhile, crop yields in the US and Canada are not expected to substantially change.
Conversely, the area unit yield for soybeans is likely to trend upward versus 2000 based on the RCP2.6 scenario. However, we anticipated a downward trend based on the RCP6.0 and RCP8.5 scenarios. In particular, using the RCP8.5 scenario, the area unit yield is projected to sharply decline in 2100.

Change rate for area unit yield for wheat and soybeans

Raw materials Country of origin RCP2.6, SSP1 RCP6.0, SSP2 RCP8.5, SSP3
2000⇒2050 2000⇒2100 2000⇒2050 2000⇒2100 2000⇒2050 2000⇒2100
Wheat Australia ↑↑ ↑↑ ↑↑
U.S.A.
Canada
Soybeans U.S.A. ↑↑↑ ↓↓ ↓↓↓
How to read the table
+ impact - impact
50%-plus ↑↑↑ ↓↓↓
25%-plus – 50% ↑↑ ↓↓
5%-plus – 25%
Within ±5%
[Shrimp, squid]
We assessed the catch yield by 2050 and 2100 based on the RCP2.6 scenario and the RCP8.5 scenario.
According to the results of these two scenarios, the catch yield in India for shrimp is expected to decline based on either model. In addition, the catch yield in Peru for squid is also likely to decrease based on either model.
Meanwhile, in Chile, there were signs of a decline and an increase depending on the model. On average, there is no major change projected based on the RCP2.6 scenario but an increase is anticipated based on the RCP8.5 scenario.
When analyzed taking these factors into account, although the catch yield for seafood, including shrimp and squid, is likely to decline, we determined that the risks related to the procurement of raw materials is likely to have little serious impact to business operations.

Rate of change for expected catch (%)

Raw materials Country of origin RCP2.6 RCP8.5
2000⇒2050 2000⇒2100 2000⇒2050 2000⇒2100
Shrimp India ↓↓
Squid Peru ↓↓
Chile
How to read the table
+ impact - impact
50%-plus ↑↑↑ ↓↓↓
25%-plus – 50% ↑↑ ↓↓
5%-plus – 25%
Within ±5%
[Palm oil]
We used reports, mainly from the International Union for Conservation of Nature (IUCN)* and the IPCC regional climate change scenarios to analyze palm oil production risks as we were unable to obtain a simulation model from a research institute. Palm oil from Malaysia and Indonesia accounts for 85% of our palm oil production. In light of this, our survey targeted the Malay Peninsula, Borneo and Sumatra, which are major production regions in these two countries.
An average high temperature of 30℃ - 32℃ and average low temperature of 21℃ - 24℃ are said to be ideal for cultivating oil palm. An assessment using the RCP2.6 scenario, estimates a disparity of around 0℃ - 2℃ from the upper threshold of both the maximum upper and lower temperatures suitable for growth. Although there is a risk of a decline in harvest yields for palm oil, we found that it is possible to continue cultivation. Meanwhile, based on an assessment using the RCP8.5 scenario, we discovered that palm oil harvest yields will decline as it is forecast temperatures will diverge from levels suitable for growth.
The Group plans to calculate the financial impact, including raw materials procurement costs, taking into account the Group's procurement ratio for palm oil by country and region.
  • *IUCN, Oil palm and biodiversity, June 2018; and SEnSOR, Potential Impacts of Climate Change on Oil Palm Cultivation, December 2017

2. Physical risks (storm damage and water risks) to the manufacturing plants of NISSIN FOODS and its suppliers

We assessed the impact to Group manufacturing plants from water risks, including drought and water stress (shortage) and irregular weather conditions (flooding and high tides).
The assessment method first pinpointed manufacturing plants at high risk of exposure to flooding and high tides, according to public documents and materials provided by outside experts. We then applied two scenarios from the RCP2.6, RCP4.5 and RCP8.5 scenarios to these plants and analyzed the change in the level of damage from disasters from 2030 to 2100 for each plant. Those manufacturing plants assessed to be high risks based on the results of this analysis will be subject to further detailed surveys and we will work to alleviate risk by developing BCP measures as needed.
Furthermore, at manufacturing plants of suppliers with strong ties to the Group, we use WBCSD’S Global Water Tool to grasp the water risks at plant locations. At plants where analysis results determined that risk is high, we have a system in place that implements supplementary surveys consisting of hearings with plant managers and tours of local plants.

[Floods]
At present, there are four manufacturing plants in Japan and one overseas that likely are exposed to a high level of risk. There is no risk change further out.
Flood risk Number of sites assessed to be high risk
At time of assessment 2050 2085
- RCP4.5 RCP8.5 RCP4.5 RCP8.5
Domestic plants
out of 29 sites)
4 sites 4 sites 4 sites 4 sites 4 sites
Overseas plantsOverseas plants
(out of 23 sites)
1 site 1 site 1 site 1 site 1 site
[High tides]
There are four manufacturing plants in Japan exposed to a high level of risk.
High tide risk Number of sites assessed to be high risk
At time of assessment 2050 2100
- RCP2.6 RCP8.5 RCP2.6 RCP8.5
Domestic plants
(out of 29 sites)
3 sites 4 sites 4 sites 4 sites 4 sites
Overseas plants
(out of 23 sites)
0 sites 0 sites 0 sites 0 sites 0 sites
[Drought]
In comparison with figures at the time of evaluation, we discovered that risks are likely to rise by 2055 and 2090 at plants in South America and Europe.
Drought risk Number of sites assessed to be high risk
At time of assessment 2055 2090
- RCP4.5 RCP8.5 RCP4.5 RCP8.5
Domestic plants
(out of 29 sites)
0 sites 0 sites 0 sites 0 sites 0 sites
Overseas plants
(out of 23 sites)
2 sites 3 sites 3 sites 2 sites 3 sites
【Water stress (shortage)】
We confirmed water stress at our manufacturing plants in Japan and abroad, utilizing the Aqueduct Water Risk Atlas water stress forecast. The results confirmed that four manufacturing plants in Japan and seven manufacturing plants overseas are exposed to the highest risk. We will strive to secure the water quality and quantity required for plant operations by identifying the physical, regulatory, and reputation risks, and implement measures to avoid each risk in these respective areas. Furthermore, on top of reducing the use of water necessary for product manufacturing processes at our production plants, we are constantly working on reusing water, including washing equipment using water which has been used for cooling.
Water stress Number of sites assessed to be high risk
At time of assessment 2030 2040
- RCP4.5 RCP8.5 RCP4.5 RCP8.5
Domestic plants
(out of 29 sites)
0 sites 4 sites 4 sites 4 sites 1 sites
Overseas plants
(out of 23 sites)
5 sites 7 sites 7 sites 7 sites 7 sites

Water-Saving Initiatives at Manufacturing Plants

3. Carbon pricing

We calculated the impact of carbon tax and the emission trading scheme on the Group by employing forecasts for CO2 total emissions trends for the Group through 2050 and future forecasts for carbon prices, based on the IEA WEO 2019 Sustainable Development scenario. In the EARTH FOOD CHALLENGE 2030, we set our target for the reduction of greenhouse gas (GHG) emissions by 2030, which conforms to Science Based Targets (SBT). By achieving this SBT target, it will be possible for us to reduce carbon pricing (cost) by around ¥1.1 billion in 2030 and by roughly ¥3.2 billion in 2040. Nonetheless, the impact of carbon pricing differs substantially owing to the policies of each country. We will therefore regularly calculate this estimate going forward based on the most recent information available.

Impact estimate

(Upper level: Million JPY/year, Lower level: USD thousand/year) (1USD=110 yen)
2030 2040 2050
Should measures not be taken to attain the SBT goal of WB2℃ (well below the 2℃ global temperature rise prior to the industrial revolution) 3,747
34,068
5,886
53,513
7,323
66,576
In case where the SBT goal of WB2℃ is achieved 2,623
23,847
2,649
24,081
1,465
13,315
Difference 1,124
10,221
3,237
29,432
5,858
53,261

Opportunities provided by climate change

Owing to the impact of climate change, it is expected there will be an increase in purchases of contingency supplies in case of natural disasters, as well as an increase in purchases of eco-friendly products due to an expansion in ethical consumers. As a result, it can be expected that there will be an increase in sales opportunities. Additionally, the Group's stance on actively tackling environmental issues will contribute to the improvement of the corporate brand value.
In recent years in particular, large-scale natural disasters, typhoons and flooding, have struck various countries. Instant noodles, which are the mainstay of the Group, can be preserved for a long time and is a simple hot meal during times of disaster. It is effective as a contingency food supply and therefore an expansion in sales opportunities can be expected.
In addition, CUP NOODLES Rolling Stock Set, which was launched in September 2019, includes three days of food (nine servings), a portable stove, water, a solar-powered light, and other items to make it easier to store reserves of instant noodles. Through a subscription service, replacement products are automatically delivered every three months, so there is no need to pay attention to best-before dates or to buy replacements. It allows a certain quantity of food to always be kept in stock while regularly consuming older stock.

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