A Chinese dairy giant has become the first company in the industry to release its nature-related information disclosure on risks and impacts based on the Taskforce on Nature-related Financial Disclosures (TNFD) guidelines, the firm announced Thursday.

Mengniu, a member of the TNFD forum, analysed the dependencies and impacts that its operations have on the environment, highlighting the risks related to biodiversity loss and outlining the company’s strategies to mitigate and manage them.

“Achieving synergistic development between dairy production and ecology has become one of Mengniu’s key objectives for sustainable management,” the company wrote in the report.

“In 2021, Mengniu formulated a special strategy for biodiversity conservation based on the draft Kunming-Montreal Global Biodiversity Framework, taking into account the actual situation of its own operations … to comprehensively promote the protection of biodiversity and build a sustainable development strategy with upstream and downstream.”

IMPACTS AND DEPENDENCIES

To assess 68 of its domestic and overseas factories, Mengniu adopted the TNFD-recommended LEAP approach, a structured guidance on how to identify, manage, and disclose nature-related issues across four phases – locate, evaluate, assess, and prepare.

The analysis applied the Exploring Natural Capital Opportunities Risks and Exposure (ENCORE) tool, designed to support companies in assessing their risks and dependencies by cross-mapping production processes and ecosystem services.

At an upstream level, Mengniu recognised high impacts linked to five main categories: terrestrial ecosystem use; water consumption; GHG emissions in ranch building and operations; soil contaminants; water pollutants.

High downstream impacts include GHG emissions, non-GHG air pollutants, and disturbances such as noise and light pollution.

The company also identified high-level dependencies related to ranch operations and forage cultivation – including surface and underground water, soil quality, and flood and storm protection.

RISKS AND OPPORTUNITIES

Mengniu also conducted an analysis and evaluation of the nature-related risks and opportunities in the short, medium, and long term, outlining its strategic and financial planning to achieve stable business development.

The company identify several acute risks related to extreme weather events and natural disasters that may affect its business and financial planning in the short term – including heat waves, droughts, and heavy rainfall.

“[Such events] can not only damage farm facilities and buildings, including barns, feed storage facilities, milking equipment, they can also result in a reduction in the production of dairy feed, such as soybeans and maize, as well as a lack of feed supply or higher prices,” the report said.

Furthermore, chronic risks such as the accumulation of large quantities of manure may lead in the long run to an excess of nitrogen, phosphorus, and other nutrients in the soil around the pasture. This would trigger soil degradation, reducing land productivity and affecting feed production.

The economic cost of nature loss is being increasingly highlighted by experts. According to a 2023 study by Oxford University, biodiversity loss and ecosystem damage could cost upwards of $5 trillion to the global economy.

In light of that, corporate nature-related financial risk assessments are climbing the investors’ agenda.

An analysis carried out by Carbon Pulse showed that shareholders’ interest in nature has ramped up in this year’s voting season, boosted by some of the first calls for standard-aligned biodiversity disclosures. The overall number of nature-related proposals increased by two from the previous year, up to 20 in total.

“Through the TNFD report, Mengniu is highlighting to stakeholders its achievements and outlining future plans to identify and assess its environmental impact and dependency as well as managing risks and opportunities,” Mengniu wrote in the report.

Last year, Mengniu and state-owned Cofco announced the first Chinese deal to import deforestation-free soybeans from Brazil, an agreement facilitated by the World Economic Forum’s Tropical Forest Alliance.

The move was seen as an important milestone, after green group WWF in 2021 found that Chinese imports are a bigger driver of tropical deforestation than those of the US and Europe combined.

By Giada Ferraglioni – giada@carbon-pulse.com

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