Improve our climate

Climate scenario analysis

Over the last years we’ve seen a growing attention to climate change and an urgent need to take action.

Governments, financial institutions, investors, our customers and other important stakeholders are setting higher demands and requirements related to climate change awareness. This has created a call for companies to disclose how climate change is affecting their financial performance and strategy.

Seafood has a smaller carbon footprint than other animal productions systems. With a growing population the world needs food, and ocean-based diets have been pointed out an important contributor to increasing the world’s food production. However, although seafood is considered as a healthy and sustainable source of protein, existing operations and exploiting new opportunities need to be done in a responsible and sustainable manner.

The Group believes that the increased focus on climate and environmental sustainability represents a significant opportunity for the Group, the seafood industry and for Norway. In this context, it is the responsibility of both the industry and political authorities to exploit these opportunities. It requires reason and knowledge to prevail in the years to come.

The Group's operations are closely linked to the natural conditions in Norwegian and international freshwater sources and marine areas. Access to clean water and clean seas is a prerequisite for the Group's operations.

LSG has set ambitious science-based targets to actively to reduce our overall carbon footprint and also focusing on reducing the environmental impact of the Group's activities.

The Task Force on Climate-related Financial Disclosure (TCFD) framework is designed to improve the clarity, consistency and reliability on climate-related disclosures for a better understanding of climate-related risks and opportunities and how to implement measures to mitigate such risks.

In 2020 the Group conducted an in depth interview analysis with 20 key internal and external stakeholders to identify what is considered to be the Group’s main risks and opportunities related to climate change. 

The qualitative scenario analysis summarized below is aligned with the TCFD recommendations. The Group’s main vision is to be the most profitable global supplier of sustainable high-quality seafood and  sustainability is at the core of every important strategy decision we make. The Group acknowledges the importance of better disclosures and aims to integrate the complete TCFD recommendations  with quantifications of potential financial impact in due course.


The transition to a low-carbon society will potentially reduce physical risks from climate change, but it will also lead to transition risks, which need to be identified, assessed and managed.  

Below we highlight the key transition and physical risks and opportunities that were identified in the interview analysis.

Transition Risks

Transition risks are risks associated in the transition to a low-carbon society. It involves risks related to regulatory changes, legal and financial responsibility for damage caused by climate change, new technology, changes in the market and consumer behaviour as well as reputational risk.


Climate policies aim to mitigate the negative effects of climate change. Policy changes and new regulations can pose a negative risk for companies through failure of compliance, or through increased costs such as carbon pricing and increased prices of feed ingredients.

For Lerøy (“LSG”), the introduction of new and more stringent climate-related regulations were identified as a risk mainly in two areas: potential new regulations that could have a significant financial impact on operations, and potential new regulations relating to the purchase of raw materials.

An increase in regional, national, international and industry specific regulations is likely to impact LSG financially through increased operating costs and decreased revenue.

Potential new climate-related regulations impacting operations and purchase of raw materials:


  • The EU taxonomy is created to steer capital towards sustainable investments. There is currently significant uncertainty related to how this will impact LSG in the short term.
    • As the seafood industry is currently not yet covered in the EU taxonomy, there is a risk that LSG’s activities will not be classified as green activities. This may impact LGS’s access to green financing.
    • LSG may further be impacted through larger technological upgrades in order to meet future requirements laid out by the Taxonomy
  • Carbon pricing and taxes.
    • An potential increase in carbon pricing will directly impact operating costs in the short term before LSG transition to lower emission technologies and solutions.
    • LSG transports products to overseas markets by air freight. If carbon taxes increase over time this will have a significant financial impact, making our products less competitive.
    • LSG uses MGO and diesel in farming and wild catch, and any taxation on fossil fuels will impact cost of fuel consumption. Potential increased taxation on vehicle transportation to European markets
  • Potential regulations regarding local pollution levels and fuel use could potentially increase transportation costs.
  • New legislation and requirements concerning the use and disposal of styrofoam and plastics.
    • More stringent regulation concerning the use and recycling of plastics in all markets may increase operation costs or lead to investments in new types of packaging material and transportation boxes.


  • Potential new legislation prohibiting direct sea operations and requiring production in closed systems.
    • A potential prohibition of direct sea operations will directly impact LSG’s entire value chain and business model.
  • Risk of regulatory changes in relation to CO2 emissions allowance per site.
  • Litigation risks in local operation areas.
  • Risk of more stringent ASC/MSC certifications.
    • If ASC/MSC certification criteria are not met, LSG’s products will lose its certification, leading to potential loss of market access and reduced income
  • Potential taxation on, or prohibition to use  soy as an ingredient in fish feed.
    • A stigmatization of soy use can prohibit soy as a component in feed composition, and require LSG to purchase alternative feed sources which can impact the overall cost of feed


  • Potential new legislation prohibiting the use of trawlers in wild fish operations due to co2 emissions associated with the use of marine gas oil (MGO), alternatively prohibiting the use of MGO.
    • Both scenarios would lead to significant investment costs for the Group as the entire trawler fleet would have to be retrofitted/renewed with low-carbon solutions.
  • Significant changes related to quota regulations for wild fish catches could have a direct impact to production capacity and income generating activities.


Development of new technological solutions will function as an effort to reduce carbon emissions and can represent both opportunities and risk. Unsuccessful investments in new technologies, or the cost of transitioning to lower emission technologies may pose a significant financial risk to LSG:

  • The risk that LSG’s existing vessel fleet could end up as stranded assets if not adjusting to technology, regulatory and/or market changes.
    • Potential large investments in new fishery/fish farming vessels and /or working boats that may need to be retrofitted in a few years when technology and requirements develop further.
  • Potential technological developments in alternative protein production.The increasing awareness of the meat industry’s global carbon impact is shifting the market to alternative sources of plant-based protein, and lab-based protein production may pose a threat to LSG if the market shifts from seafood to these alternative protein sources.
  • Technological developments in land-based fish farming.
    • Land-based farming poses a threat to LSG as this moves production closer to the market, eliminating the need for long-distance transport, especially air freight.


Climate change awareness has created a shift in demand for lower emission foods. Failure to comply to stakeholder environmental demands may lead to a reduced demand for our products, impacting our revenue.


  • Change in consumer needs and behaviour.
    • Young consumers (with future purchasing power) are changing their eating habits and have a larger focus on climate issues and carbon footprint on food they purchase. Rising markets for alternative plant-based protein sources may affect the competitive environment and potentially reduce demand for LSG’s products This risk has a potential direct impact to the Group’s profitability.
      • Climate awareness is becoming increasingly important for consumers in Norway.
    • Consumers set higher demands and requirements to the products they purchase. There may be an increase in demand for certified fish. This may have a financial impact if these demands are not met.


Climate change has been identified as a potential source of reputational risk tied to changing customer or community perception of a company’s contribution to or detraction from the transition to a lower-carbon economy. By not meeting the expectations from stakeholders, the reputation of LSG may be damaged and directly impact consumer behaviour.

Brand specific:

  1. LSG is a well-known name to consumers. Reputational risks is therefore significantly larger for LSG than other companies within the industry.
  2. Any damage to LSG’s reputation regarding climate and sustainability will reach the consumer who may stop buying their products. If LSG is associated withnegatively affecting the climate and harming the marine ecosystem, this may significantly impact revenue.
  3. Reputational value today is more important than 10-15 years ago. Young consumers have more opinions, and there is a large risk in not winning them over.

Industry wide:

  1. There is a risk of industry wide propaganda against the seafood industry. This poses  a threat to seafood products being perceived as healthy and sustainable products. This may potentially impact sales and overall profitability to the Group.
  2. The use of soy in fish feed impacts reputation.
    • The market has decided that soy is a bad raw material in terms of climate, which may impact purchasing decisions of end consumers. Even though 100 % of the soy used in feed is certified, the use of soy alone can damage reputation.
  3. Growing awareness of the use of air freight in transportation may harm the overall reputation of seafood.
  4. Any potential negative impact on the marine ecosystems is likely to have a direct financial impact on revenue. There is a long term risk that aquaculture may potentially be blamed for ruining the ecosystem in the ocean.

Physical climate-related risks

Physical impacts are risks associated with direct implications of climate change, and can be event driven such more extreme weather (acute) or longer-term shifts in climate patterns such as higher temperatures (chronic)

Financial implications vary from costs associated with damage of sites and vessels to the larger impacts associated with loss of fish and less stable access to raw materials as well indirect impacts from supply chain disruption,, Physical risks could have a direct impact on LSG’s production capacity and revenue growth.  


Acute physical risks are risks associated with more frequent extreme weather such as storms, hurricanes, floods and heavy precipitation of rain and snow. Such events may impact LSG’s direct operations, or cause disruptions in the supply chain.

For LSG, any events delaying production has a financial implication. It is therefore crucial for LSG to be prepared for such scenarios. Acute physical risks can also impact the supply of raw materials used in fish feed, which is a extremely important for LSG.

Direct operations

  • Extreme weather events such as heavy snowfall, extreme cold weather, storms and waves can have direct implication on production sites and fishing operations:
    • Storms and waves increase the load on all installations. This may lead to major material damage and could cause LSG to lose production capacity short term which will have a direct impact on revenue.
    • Material damage on production sites further increases the risk of escapes.
    • Extreme weather can damage fishing fleet so that operations are not possible, directly impacting production capacity and revenue.
  • Extreme weather may lead to loss of ships at sea and cause oil spill along the Norwegian coastline, which may impact our fish farm facilities. If there are no healthy fish in Norwegian waters, operations stand still, directly impacting revenue.
  • Extreme weather events which cause long time drought may have a significant impact on our ability to produce Smolt. Preventive actions in place to mitigate this risk are:
    • Each smolt production facility have water magazines with stored water in case of emergencies.
    • Continuous surveillance of water levels in lakes/Rivers etc
    • Long term contracts and/or concessions for use of freshwater
    • Non of our water sources is used for human water consumption
  • Facilities in coastal areas are increasingly exposed to landslides.
  • Extreme weather events could impact logistics and distribution.
    • For example: Large amounts of snow in Northern Norway may delay deliveries of fresh fish and hence lose value. Customers may not want to purchase at same price.
  • Extreme weather events can lead to changes in water quality, leading to disease, parasites and algae that can kill the fish overnight. This will have direct impact on revenue.
    • Any events impacting the biology in the ocean, especially algae bloom, is potentially a risk that can have large impacts on LSG’s profits

Supply chain

  • Extreme weather, such as drought and floods can affect the production of raw materials that LSG depends on in feed ingredients (soy, wheat, rapeseed oil, corn).This can impact both availability and cost of raw materials
  • Extreme weather events pose direct HSE risks in the entire value chain.


Chronic climate risks are risks derived from longer-term shifts in climate patterns, such as higher temperatures in air and sea, and change in sea levels. The sea is LSG’s biggest asset, and any changes in sea levels or temperature that directly impacts the marine ecosystem can potentially impact the company’s livelihood in the long run.

Rising sea temperatures:

Wild catch

  • Sea temperatures affect the migration patterns of wild fish.
    • Changes in sea temperatures could lead the cod stock further north. This causes the fishing zones to move, directly impacting the transportation radius of trawlers, increasing fuel use and costs.
    • It poses a large challenge for coastal fishing if cod is no longer found along the Norwegian coast line, which will impact the availability LSG has to purchase fish from the coastal fleet
    • There is a frisk if LSG are not able to harvest the full fishing quota. This will directly impact revenue capacity from our trawler fleet
  • A rise in sea temperature may cause a change in the substances found in fish. This could make products less attractive to the market and can potentially have direct impact on revenue.


  • Changes in sea temperatures could lead other fish stocks further north (and closer to the coast) – like mackerel shoals and turbot. These species can make holes in the fish pens and result in an increased risk of fish escapes.
  • Increased sea temperatures provide better conditions for salmon lice.
    • This would make operations in the south more challenging and can also affect aquaculture in the north in the long term.
  • A rise in sea temperature may cause a change in the substances found in salmon. This could make products less attractive to the market and can potentially have direct impact on revenue.
  • Changes in oxygen levels, increased precipitation, changes in sea levels in fjords can lead to poorer conditions for farming, increasing the risk of disease and mortality.

Rising air temperatures

  • An increase of air temperature will increase the need for refrigerants to keep the fish cold during transportation. This will for instance require more ice, making transportation higher which again will lead to higher emissions and can potentially impact costs.


As markets and consumer behaviour shift in response to climate change, the seafood industry have a substantial opportunity to harness solutions addressing climate change. Companies prepared to manage  and mitigate climate-related risks, will obtain a competitive advantage.

Technological improvements may lead to resource efficiency. Additionally, an increasing supply of low-/zero-emission energy sources, combined with potential carbon pricing, may create a shift in demand for these services.

Explore market shifts towards climate friendly products and services:

  • Alternative transportation solutions (blue wrap or sub chilling) to increase durability of fresh fish will eliminate or reduce dependency on air freight of fresh fish. This may reduce costs and improve reputation.
  • Innovations enabling production of fish feed ingredients in markets closer to home, potentially in lab based controlled environments, may eliminate or reduce dependency of unstable supply of raw materials such as soy. This will also reduce transportation, further reducing costs and emissions.
  • Moving towards more climate friendly packaging, with focus on recycling, is a clear signal to the customer that LSG have serious considerations regarding climate and sustainability. This may have a positive impact on reputation and revenue growth
  • There are large opportunities associated with reaching young and future consumers who are concerned about climate change, as this can have a positive impact on revenue.

Explore opportunities that follow a new positioning in a low carbon market:

  • A shift in market preference from whole fresh to refined fillets or frozen may increase market share, directly impacting revenue, and lower costs and emissions from air freight.
  • There are large opportunities associated with the perception of seafood and aquaculture as a contributor to a sustainable food production for a growing world population.
    • EAT, European Green Deal, WRI etc. are all pointing to aquaculture as a contributor to sustainable future food requirements. This may influence market perception.
    • A growing population will increase global demand for food and protein. Seafood is viewed as a healthy and sustainable protein and there are opportunities of new and growing markets, which will impact revenue growth.
  • Investments in low-carbon solutions could lead to eligibility for financial support schemes from for instance Enova which is a Norwegian governmental owned company aimed to contribute to the restructuring of energy use and energy production in Norway.

Exploit collaborative efforts:

  • Improve competitive advantage through positioning as a sustainable protein provider by collaborating with suppliers to reinforce efforts to a shift to climate friendly solutions.
    • Work actively with suppliers to improve life cycle analyses (LCA) of fish feed, to further improve composition and make climate friendly decisions. This can improve reputation, and potentially impact revenue growth.
    • Work actively with transportation providers to be in the forefront of low-emission goods transportation.This will potentially improve reputation, reduce overall emissions and costs through avoided carbon or fuel taxes.
  • Active communications with authorities and involvement in policy making will reduce climate-related risks and enable LSG to be ahead of any regulatory changes.

Resource efficiency

Resource efficiency as equivalent to cost efficiency and can be obtained through:

  • Increased resource efficiency in processing of fish.
    • More efficient use of products, such as in fish feed, or as fish flour/oil, can reduce costs.
    • Filleting fish in Norway for lower weight in freight to processing plants in Europe can reduce transportation costs
  • Increased efficiency in waste management:
    • Circularity and return schemes in packaging and plastics from the ocean can reduce costs.
  • Better data technologies for all systems may lead to increased control of operations, further improving efficiency and potentially reducing costs.


Below we highlight the top three climate-related risks and opportunities  that were identified as the most strategically and financially important for LSG based on the results from the survey:


  1. Reputation: The risk of LSG being perceived as an unsustainable brand. If LSG is associated with large contributions of GHG emissions and harming the marine ecosystem, this can significantly impact revenue and profitability.
  2. Policy & legal: The introduction of new climate related regulations directly impacting operations. Potential new legislation prohibiting direct sea operations will directly impact LSG’s entire value chain. New legislations regulating our trawler fleet or fuel use can also have a direct financial impact. There is also a risk of local regulatory changes in relation to fuel and CO2 emission allowance per site.
  3. Policy & legal: The introduction of new climate related regulations directly impacting purchase of raw materials. Examples of prohibition of, or taxation on, the use of soy as a component in feed can limit the supply of, or increase the cost of feed, which is pointed out as one of LSG’s main contributing input factors.


  1. Market: Influencing the market to view seafood as a sustainable protein source. EAT, European Green Deal, WRI etc. are all pointing to aquaculture as an important contributor to sustainable future food requirements. This may influence market perception. Additionally, the population is growing, which will increase the global demand for food and protein. If seafood can maintain its positioning as a healthy and sustainable source of protein, there are opportunities to be exploited in a growing market.
  2. Products & services: LSG can improve and increase a competitive advantage in a low-carbon economy by actively collaborating with their suppliers of fish feed and transportation providers to reduce GHG emissions and save costs.
  3. Resource efficiency: LSG can reduce costs through resource efficiency and circularity in all operations. This includes more efficient use of biproducts, reducing transportation volumes of fish to processing plants in Europe, return schemes to reduce waste and use of plastics, and the introduction of technologies to improve data availability and control, further improving efficiency.

The below document with tables summarize the findings from the interviews.

Note that the risk and opportunity assessments are provisional and will be further developed. The heatmapping is result of a preliminary assessment of risk level based on interview input. We intent to stress-test this resilience in the future by using scenarios and quantitative analysis.

Potential financial impact is categorized with the following colours in the summary table.

The below document with tables summarize the findings from the interviews.

Note that the risk and opportunity assessments are provisional and will be further developed. The heatmapping is result of a preliminary assessment of risk level based on interview input. We intent to stress-test this resilience in the future by using scenarios and quantitative analysis.

Potential financial impact is categorized with the following colours in the summary table.

Skjermbilde potential impact.JPG