Risk Management System

Relevance to our business

The Fuji Oil Group operates four business segments (Vegetable Oils and Fats, Industrial Chocolate, Emulsified and Fermented Ingredients, and Soy-Based Ingredients) covering Japan, the Americas, Europe, Southeast Asia, and China. This diversified, global presence exposes the Group’s value chain to a wide gamut of potential risks, including impacts on numerous fronts arising from social issues and economic changes.
To address these risks, we developed a Group-wide risk management system led by the Management Committee Meeting aimed at identifying significant risks and managing them. This is done through a process of developing and implementing responsive measures, monitoring, evaluating results, and making improvements. Risks are identified and selected for management considering a comprehensive list of factors including the level of impact on Group business, likelihood of occurrence, and time of onset. This is done based on information sources that reflect the Group’s operating environment, including risks identified by executive teams, our ESG materiality map, and risk maps created by individual Group companies.

Basic approach

The Fuji Oil Group has selected 12 items as significant risks that need to be managed. We designated Chief Officers and formulated response plans for each of these risks. In addition, we created a framework for reporting and monitoring the status of our risk responses to the Board of Directors.

• * Follow the link below to learn more about the identified significant Group-wide risks.

  https://www.fujioilholdings.com/en/ir/policies_and_systems/risk/

Management system

Each Group company creates a risk map and identifies their specific operational risks. At the same time, the Group determines strategic and financial risks through the Management Committee Meeting. After comprehensively identifying all the risks through these measures, the Board of Directors decides which risks are of particular significance. The Subcommittee on Group Significant Risks, established in FY2022 under the Sustainability Committee,^*1 uses the members’ diverse perspectives to review these particularly significant risks and assess the appropriateness of responsive measures to aid in further mitigating risks that could damage the Group’s corporate value.

For each particularly significant risk identified through the abovementioned process, a Chief Officer is designated and response measures are established. In addition, the ESG Representative in charge of risk management supervises the monitoring of these risks and reports regularly to the Board of Directors.

The risk management system was overseen by the Chief “ESG” Officer (C“ESG”O) in FY2021. Since FY2022, that role has been transferred to the ESG Representative. The Sustainability Committee,^*1 an advisory body to the Board of Directors, monitors the progress and results of initiatives as a material ESG issue.^*2

• *1 Follow the link below to learn more about the Sustainability Committee.

  https://www.fujioilholdings.com/en/sustainability/sustainability_management/

• *2 Follow the link below to learn more about material ESG issues.

  https://www.fujioilholdings.com/en/sustainability/materiality/

Goals / Results

Analysis

The 12 significant risk items that we selected for management were properly managed by their respective Chief Officers and their status was reported to the Management Committee Meeting and the Board of Directors. As a result, all goals were achieved.

Next step

We recognize that properly managing risks using the PDCA method and disclosing relevant information are crucial to creating a functioning risk management system and to making a risk-proof, trusted company, which is an integral part of society. To address these issues, we set the following goals for FY2022.

Risk management method adopted by each Group company

PDCA

The Fuji Oil Group clearly defined the roles of Fuji Oil Holdings Inc., companies acting as regional headquarters and each Group company, and established a Risk Management Committee at each company. The Risk Management Committee takes the lead in managing the risks at each Group company by implementing the PDCA cycle, going from assessing risks (Plan), implementing countermeasures (Do), conducting self-checks (Check), and to making improvements and developing a plan for the next fiscal year (Act). It also promotes risk management through close collaboration between Fuji Oil Holdings Inc., companies acting as regional headquarters, and Group companies. In risk assessment, the Risk Management Committee of each Group company identifies all potential risks for the company and assesses them by plotting them on a risk map (vertical axis: degree of damage to/impact on the company; horizontal axis: likelihood of occurrence). Based on the assessment, the Committee specifies risks that would cause a significant degree of damage to/impact on the company as “significant risks.” It then decides on how to respond to all significant risks to mitigate their potential impact.
In the event of an emergency, an Emergency Headquarters will be established based on the Risk Management Committee, which promotes risk management activities in ordinary times, so that we can respond to the emergency quickly and appropriately across the Group.

Fuji Oil Group’s risk management

Response to the TCFD recommendations

In May 2019, the Fuji Oil Group declared our support for the Task Force on Climate-related Financial Disclosures (TCFD). Based on recommendations by the TCFD, we are committed to proactively disclosing information on four areas: governance, strategy, risk management, and metrics and targets.

Information disclosure based on the TCFD recommendations

Governance

Under the supervision of the ESG Representative, the Fuji Oil Group manages climate change risks and opportunities through a Group-wide risk management structure that handles significant Group-wide risks. We perform scenario analysis based on the TCFD recommendations, and the results are reported and approved in the Management Committee Meeting and the Board of Directors meeting at least once a year.

Strategy

We performed the TCFD-recommended climate change scenario analysis, selected climate change risks and opportunities, and qualitatively assessed their financial impact for Group companies in Japan in FY2019, and for major Group companies outside Japan in FY2020. In FY2021, we conducted a quantitative assessment of the financial impacts^* of climate-related risks after conducting the scenario analysis again based on 1.5°C/4°C climate scenarios instead of 2°C/4°C, with the goal of achieving a more aggressive climate intervention.
Going forward, we will continue to promote initiatives that are currently being carried out by the Group to reduce CO₂ emissions based on Environmental Vision 2030. This includes energy saving and renewable energy initiatives aimed at creating a positive impact on the Group, society, and planet. Moreover, the market for plant-based foods, one of the Group’s strengths, is expected to grow as concerns rise over practices that negatively affect climate change such as the conversion of forest to farmland and livestock fattening. The Group will continue to work on solutions to global issues and for a decarbonized society. We will do so by conserving the environment through sustainable procurement and by supplying plant-based food ingredients.

• * Refer to “Assessment of Climate Change Risks and Opportunities and their Financial Impact on the Fuji Oil Group” below for details.

Risk management

We identify significant Group-wide risks, including climate risks, considering a comprehensive list of factors including the level of impact on Group business, likelihood of occurrence, and time of onset. This is done based on information sources that reflect the Group’s operating environment, including risks identified by executive teams, our ESG materiality map, and risk maps created by individual Group companies. We have developed a Group-wide risk management system led by the Management Committee Meeting aimed at managing these risks through a process of developing and implementing responsive measures, monitoring, evaluating results, and making improvements. Climate change risks are considered as one of the significant Group-wide risk, and are managed through the Group-wide risk management system. The details of discussions and responses are reported to the Board of Directors at least once a year.

Metrics and targets

In Environmental Vision 2030, the Fuji Oil Group committed to a 40% reduction in Scope 1 and 2 CO₂ emissions by 2030 compared to 2016. Going forward, we will proactively engage in energy conservation initiatives, introduce new facilities that use less energy, and use renewable energy at production sites to achieve our Environmental Vision 2030 targets.
To reduce Scope 3^*1 Category 1^*2 emissions, which account for the largest percentage of Group emissions in Scope 3, we created a survey form that assesses suppliers’ progress in reducing their CO₂ emissions and began the process of engaging several suppliers to our production sites in Europe. We will continue to work to reduce CO₂ emissions across the Group value chain.

We are also exploring the adoption of an internal carbon pricing system^*5 to drive further emissions reductions. Based on carbon pricing and emissions trading systems (ETS) around the world, we set the internal carbon price at 10,000 yen per metric ton of CO₂ at Fuji Oil Co., Ltd. as a pilot starting in FY2022 (initially to serve as a reference for investment decision-making). From this result, we will discuss optimum pricing and other factors before a full-scale introduction.

• * Follow the link below to learn more about Environmental Vision 2030.

  https://www.fujioilholdings.com/en/sustainability/environmental_management/

• *1 Scope 3: Emissions from the activities of non-Group companies in our value chain (Categories 1–15)
• *2 Category 1: Raw materials
• *3 Scope 1: Direct emissions of greenhouse gases from our own operations
• *4 Scope 2: Indirect emissions of greenhouse gases from the use of electricity, heat and steam supplied by third parties
• *5 An internal scheme for promoting low-carbon investment and initiatives by placing a price on carbon based on estimates conducted within the organization.

Assessment of Climate Change Risks and Opportunities and their Financial Impact on the Fuji Oil Group

Level of impact

The level of impact categories — small, medium, and large — refer to the magnitude of financial impact that is projected to occur around the year 2050 based on estimates that assume a certain set of conditions, including but not limited to the Fuji Oil Group’s current business portfolio, financial condition, and business performance. This financial impact assessment is based on these impact categories and therefore is subject to change.
Large: Potential profit impact of 10 billion yen or more
Medium: Potential profit impact of 2 billion yen to less than 10 billion yen
Small: Potential profit impact of less than 2 billion yen

Risks

• *1 The level of financial impact of “increased cost due to adoption of carbon taxes” associated with “risk of increased cost of complying with environmental regulations” was calculated for around the year 2030 based on carbon tax projections published by the IEA, IPCC, and other third-party entities and on projections of the Group’s CO₂ emissions.
• *2 Scope 1: Direct emissions of greenhouse gases from our own operations
• *3 Scope 2: Indirect emissions of greenhouse gases from the use of electricity, heat and steam supplied by third parties
• *4 Scope 3: Emissions from the activities of non-Group companies in our value chain (Categories 1–15)
• *5 Category 1: Raw materials
• *6 An internal scheme for promoting low-carbon investment and initiatives by placing a price on carbon based on estimates conducted within the organization.

Opportunities

• *1 PBF: Plant-based food
• *2 One Health: A concept recognizing the fact that safeguarding the health of ecosystems and animals serves the health of humans as well, inviting everyone to think of and work to protect the health of people, animals and ecosystems as one living system.

Business continuity plan (BCP)

A host of environmental risks — from the rising frequency of natural disasters such as earthquakes, tsunamis, storms and floods, to pandemics of infectious diseases such as COVID-19 — cause damage that interrupts socioeconomic activity. As a company engaged in the food industry, which is indispensable to daily living and serves life-critical functions, the Fuji Oil Group has a social responsibility to keep delivering products to customers even in such crises. To that end, a business continuity plan (BCP) is essential. We are developing our BCP and implementing initiatives under the following BCP Policy in order to ensure employee safety, minimize damage to business assets, and enable the continuation or early restoration of our core businesses.
For natural disasters, we are carrying out a range of measures including introducing a safety confirmation system for quickly verifying the safety of Group employees; safety confirmation training using the safety confirmation system and an emergency contact tree; conducting periodic disaster preparedness training for major earthquakes; and securing the continuity of information systems. As a response to COVID-19, we have been implementing safety precautions at workplaces, staggering commuting hours, and actively promoting working from home and telework using satellite offices. Through activities like these, we strive to stage a rapid and appropriate first response in emergencies, balance employee safety with business continuity, and minimize damage.

Education and awareness-raising

The Production Productivity Management Group’s Risk Management Team at Fuji Oil Holdings Inc. conducts risk management education and awareness-raising activities for our Group companies through regular visits, video conferences, etc. In this way, we firmly establish the risk management PDCA cycle and improve the quality of risk management at each Group company. In FY2021, we increased preparations for supply chain disruption risk at Group companies, created a response checklist to be used by our Emergency Headquarters during various types of potential crises, and reviewed the risk assessment methodology used in our annual risk assessment of Group companies. In addition, we provided training to employees newly posted to international assignments on the fundamentals of risk management and the risk management system of the Fuji Oil Group. This is done as part of their pre-assignment training. Through these activities, we strive to raise our employees’ risk awareness and their sensitivity to risks.