In addition to customers, other stakeholders like banks, investors and insurance companies have requirements regarding sustainability.
The Group believes that its increased focus on climate and environmental sustainability represents a significant opportunity for the Group, the seafood industry and for Norway.
Norwegian aquaculture's food production is a part of the solution to feed the world's population in the future. In this context, it is the responsibility of both industry and political authorities to exploit these opportunities. It requires reason and knowledge to prevail in the years to come.
Regardless of the good position of the industry, the Group shall work actively to reduce the footprint of the Group's activities.
All food production results in a footprint, and it is important not to forget this in our eagerness to improve. 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.
Climate related risks & opportunities
Transition risks are risks associated with society’s adaptation to climate change. It involves the risk that changes in policy, liability and technology can impact markets and consumer behavior. The TCFD framework divides transition risks into the following categories: Policy & legal, Technology, Market and Reputation.
Policy and Legal
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 of operation, such as carbon pricing, increased prices of feed ingredients.
For LSG, the introduction of new and more stringent climate-related regulations were identified as risks mainly in two areas: new regulations directly impacting operations, and new regulations directly impacting the purchase of raw materials.
Emerging regulation impacting direct operations & purchase of raw materials:
There is a general uncertainty risk associated with new legislation, and how this will impact LSG and their operations. This was pointed out by several participants as a general risk. More specifically the following risks were identified:
Technological solutions will function as an effort to restrain carbon emissions through substitution or upgrade of existing products and services. Unsuccessful investments in new technologies, or the cost of transitioning to lower emission technologies may pose a risk to companies.
Climate change enlightenment creates shifts in demand and supply, which can impact and pose risks on both supplier- and consumer side.
Reputational risks are risks associated with consumers perception of a company’s contribution, or lack thereof, to the transition to a low carbon economy.
Physical risks are risks associated with direct implications of climate change, such as higher temperatures (chronic) and more extreme weather (acute).
Financial implications vary from costs associated with damage of sites and boats, to the larger impacts associated with loss of fish and less stable access to raw materials, substantially impacting the main revenue source of LSG.
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 further up in the supply chain.
For LSG, any events delaying production has a financial implication. Due to the uncertainty of the timing of events, it is 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 large dependency for LSG.
Chronic climate risks are risks derived from shifts in climate patterns in the long run, such as higher temperatures in air and sea, and change in sea levels. As has been pointed out in most interviews, the sea is LSG’s biggest asset, and any changes in sea levels or temperature that directly impacts the marine biology can potentially impact the company’s livelihood in the long run.
Companies prepared to operate in a low-carbon economy, and manage and face 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.
Resource efficiency as an equivalent to cost efficiency, can be obtained through:
Suvey ranking: Top 3 climate related risks & opportunities
The following three climate-related risks and opportunities were identified as the most strategically and financially important based on the results of the survey shared with each participant after the interview process was concluded:
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.