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View Sumitomo Corporation's Sustainability : Biodiversity

Basic Concept

Sumitomo Corporation Group’s business activities largely depend on the wealth of Earth’s diverse living organisms as well as from the biodiversity that is generated by their many networks. Therefore, our Environmental Policy recognizes placing great importance on preserving the environment, including the natural ecosystem and biodiversity as an important issue for us. We make efforts to understand how our business activities that may have a significant impact on biodiversity depend on such biodiversity, as well as what kind of impact such activities have on biodiversity, in order to minimize their impact on ecosystems and contribute to ecosystem restoration.

In the process of reviewing new projects and monitoring existing projects, we also assess social and environmental risks including impact on ecosystems, and check the status of management and improvement.

Sumitomo Corporation Group Environmental Policy

DFF Inc.

Trial Analysis Based on TNFD’s Beta Framework

In June 2022, we endorsed the TNFD* and joined the TNFD Forum supporting the TNFD activities. We recently conducted an analysis based on the TNFD’s Beta v0.4 framework to understand the dependencies and impacts of biodiversity in our business activities and to organize our current initiatives and establish new measures for the future. We are also feeding back the insights gained through our analysis to the TNFD.

  • Taskforce on Nature-related Financial Disclosures. A global initiative aimed to develop and deliver a risk management and disclosure framework for organizations to report and act on evolving nature-related risks.

Details of Our Trial Analysis

We conducted our trial analysis in line with procedures of the LEAP analysis, which is a technique recommended by the TNFD. This time, we conducted an in-depth analysis of our forestry business in New Zealand, with separate analysis of the characteristics of each of the four sites where we do business in the country.

Procedures of the LEAP analysis

Identifying a Business Case for a Trial Analysis

Using the ENCORE analysis tool recommended by the TNFD, we conducted a primary screening of each of our business divisions and confirmed that businesses related to metal resources refining, oil drilling, agricultural products, real estate, and forestry have the highest risk scores. In addition, the TNFD beta framework has categorized Renewable Resources and Alternative Energy, including forest management and biofuel-related businesses, as a priority sector that is more likely to be financially impacted. Based on these findings, we determined that the upstream supply chain, which includes material procurement, is an area of high nature-related dependencies, impacts, and risks. Therefore, we decided to conduct this trial analysis on Summit Forests New Zealand (SFNZ), our forestry company in New Zealand.

Company details

Company Name Summit Forests New Zealand Ltd. SUMMIT FORESTS
Year of founding 2013
Business Description Management of owned forests and sale of timber harvested by the company or others to domestic lumber mills or export thereof
Capital 137million NZD(approx. ¥10.2billion) /
Ownership: 100%
Offices Auckland, Kaitaia, Gisborne, Coromandel
Harvestable area 50,000hectares (Main species under cultivation: Radiata pine)

Confirming Nature-related Dependencies and Impacts of Forestry Business in General

As part of our analysis of the forestry business, we started by using the TNFD-recommended ENCORE analysis tool, academic papers, and other methods to confirm dependencies and impacts associated with a typical forestry business, and we found that this business is dependent on climate and soil.

We also learned that the forestry business in New Zealand is particularly dependent on a “stable climate” and “soil suitability.” On the other hand, when looking at the impact that this business has on nature, we found that excessive harvesting and excessive use of chemicals in this business carries risks for ecological destruction of the surrounding environment, and therefore we organized these risks into “cultivation and harvesting” and “fertilizers and pesticides.”

Possible natural capital-related dependencies and impacts of a typical forestry business in New Zealand
Possible natural capital-related dependencies and impacts of a typical forestry business in New Zealand

Identifying Nature-related Risks for SFNZ and Evaluating their Materiality

1) Business Risks Related to Nature

We identified 9 associated risks as a result of applying the impact drivers, state of nature, and ecosystem services, indicated by the TNFD beta framework, to SFNZ’s forest operation. We also referenced the forestry business risks illustrated by the World Business Council for Sustainable Development (WBCSD).

Example: Risk analysis of impacts on threatened species
Example: Risk analysis of impacts on threatened species, with SFNZ-owned forest areas (left) and biodiversity hotspots (right) (Tool: IBAT)
Business Risks Related to Nature

2) Analysis of Each Business Site and Identification of Material Business Risks

Using IBAT and other tools recommended by the TNFD, we conducted a risk analysis of the nine business risks that we identified in each of the four areas where SFNZ operates in New Zealand, and then applied a qualitative matrix evaluation to each of them along two axes—degree of impact on business (financial and legal perspectives), and likelihood of impact occurring (relevance of business and risks). As a result, we identified four material business risks for SFNZ’s business. They are “Risks related to harvesting and development,” “Risks related to natural disasters,” “Risks related to impacts on threatened species,” and “Risks related to infringement of the rights of indigenous peoples.”

Nature-related Material Risks Identified in SFNZ’s Forestry Business

Identifying Nature-related Business Opportunities for SFNZ and Evaluating their Materiality

1) Business Opportunities Related to Nature

Using the same approach as when identifying business risks, we applied the sub-categories, detailed in the TNFD beta framework, to the forestry business and identified six business opportunities.

2) Identification of Material Business Opportunities

We applied a qualitative matrix evaluation to each of the business opportunities that we identified along two axes—degree of impact on business (financial and legal perspectives), and likelihood of impact occurring (relevance of business and risks). As a result, we identified three material business opportunities for SFNZ’s business. They are “Shift in timber-related markets (CO2 absorption credits)”, “Improvement of timber productivity” and “Shift in awareness towards timber.”

Identifying Nature-related Business Opportunities for SFNZ and Evaluating their Materiality

Examining Metrics and Targets

Based on the material risks and opportunities that we identified, we examined metrics and targets for SFNZ’s business operation. As a result, we set targets for future business operations and illustrated examples of typical business opportunities.

Business Targets Related to Material Risks

For SFNZ’s business risks that we considered to be particularly high risk for the company, with a high likelihood of occurring and a high degree of impact on business, we established specific business targets based on the Kunming-Montreal Global Biodiversity Framework (GBF) and in light of initiatives in SFNZ’s Forest Management Plan. The company is already implementing many initiatives that contribute to achieving these targets and will continue the efforts.

Risks Reference GBF Indicators Targets Initiatives already underway and contributing to achieving the targets
Business-related Material Risks Infringement of the rights of indigenous peoples Target 22
  • Develop and implement management processes that take the rights of indigenous peoples into account
  • Conduct extensive business partnerships with indigenous peoples
  • Create employment opportunities and conduct vocational training for local communities
  • Implement measures to support landowners become sustainable forest managers
Impacts on threatened species Target 4
  • Implement initiatives to prevent species extinction and to dramatically reduce extinction risk
  • Develop operational guidelines for the protection of threatened species and identify rare and threatened species that could be found in the forest areas
  • Develop and share operational guidelines in the event of an employee discovering threatened species
  • Manage actions to maintain and restore the genetic diversity of native species
  • Conduct ecological surveys to monitor kiwi bird populations
  • Conserve rare animals and plant species and implement bio-controls in cooperation with nature protection authorities
Harvesting and development Target 1
  • Develop and implement management processes that respect the rights of indigenous peoples and local communities
  • Develop measures with local community representatives to mitigate impacts of harvesting plans on biodiversity
Natural disasters Target 11
  • Develop measures to reduce river, flood, and fire risks
  • Participate in and advocate for development and amendment of rules related to operating forestry businesses with a focus on river and flood risk measures led by New Zealand authorities
  • Develop plans for fire prevention
  • Maintain firebreaks

Material Business Opportunities

For SFNZ’s business opportunities that we consider to be particularly material for the company, with a high likelihood of occurring and a high degree of impact on business, we recognized the following potential business opportunities.

Potential business opportunities (examples)

Shift in timber-related markets (CO2 absorption credits)

Official participation in the New Zealand Emissions Trading Scheme (NZ ETS)

It is said that obtaining and selling credits for the CO2 absorption value of existing forest resources not only creates a new source of revenue, but also contributes to climate change measures and biodiversity conservation.

We are forecasting an expansion of this new source of revenue by leveraging the absorption capacity of the 66,000 hectares of forest area owned by SFNZ to participate in the NZ ETS.

Shift in awareness towards timber

Maintaining and promoting FSC certification

In New Zealand, the government has established strict controls on forest management, and a government-led legal guarantee system is also being developed. Furthermore, the entire country is currently acquiring and promoting FSC certification.

Large portions of forest area owned by SFNZ already have FSC certification, hence it is possible that a shift in social and consumer awareness will increase demand for certified timber and contribute to growth of revenues.

Improvement of timber productivity

Digitalization and smartification in forest operations

Using IoT in the forestry business can help to appropriately understand the state of a forest’s health, which leads to stable production of high quality timber.

We are using a geographical information system (GIS) to understand the topography of the 66,000 hectares of forest area owned and managed by SFNZ, but adoption of technologies such as laser measurement of our forest resources may lead to growth of revenues.

Insight Earned from the Trial Analysis (Our feedback to the TNFD)

In light of the processes and results of our trial analysis, we provided the following feedback to the TNFD to improve the usefulness of information provided to investors through TNFD framework-based disclosures.

  1. Due to lack a of normative scenarios, it is difficult for a company to set and disclose its own scenarios for each of its businesses.
  2. As identifying priority areas for a conglomerate company which operates in various sectors is a challenge, a specific LEAP analysis guidance for such companies would be desirable.
DFF Inc.

Ambatovy Project Targeting “No Net Loss, Net Gain”

The Ambatovy Project in the Republic of Madagascar, which is one of the largest mine development projects in the world, began development in 2007 to expand the supply of nickel, cobalt and other metals. Establishing the environmental target of “no net loss, net gain,” it is conducting a unique biodiversity program.

In the Ambatovy Project, many new facilities, such as mining sites, refinery plants and pipelines, need to be constructed and operated, which poses substantial impacts on the surrounding environment. Particularly in Madagascar, there remains a globally precious natural environment where as many as 1,000 species of endangered animals are living. Giving careful consideration to these natural habitats in developing and operating the project, the biodiversity program accounts for the impact on every site. In developing and implementing plans for the project, special emphasis is placed on environmental management in compliance with not only Madagascar national laws but also various guidelines, such as the World Bank safeguard policy, the International Financial Corporation's (IFC) Performance Standards, the World Health Organization (WHO) standards, and the Equator Principles. In line with the ISO 14001 standard, we are also managing according to the Ambatovy Environmental Management System (EMS).

Under the Ambatovy EMS, we identified a number of priority areas, including flora and fauna habitats and marine ecosystems, and when developing, operating, and closing mines, we formulate management plans for business-related sites, such as plants and port facilities, and work according to those plans. For example, in developing the mining area, we created a buffer zone around the mining site of about 1,600 ha to ensure protection of wild animals. When trees are cut down to develop the mine site, felled trees are left on site for a while so that animals inhabiting these trees can move into the buffer zone. We also conduct ecosystem surveys jointly with international environmental NGOs. If endangered or other species that need to be protected are identified in such a survey, we adopt various programs designed to reduce impacts on ecosystems, for example, relocation of such species to a sanctuary and use of a fish farming system.

Furthermore, as part of this biodiversity program, we are collaborating with governments, local communities, and conservation and development NGOs to apply the IFC and BBOP standards while also promoting a large-scale biodiversity offset program. This is an approach to mitigate impacts of the development on ecosystems by restoring or creating another ecosystem. Specific measures include the conservation of a forest area of 6,800 ha in the Ankerana area, which has an ecosystem similar to that of the development site of the project. In an attempt to offset the net loss of biodiversity, we have implemented measures to protect four conservation areas of more than 14,000 ha in total, equivalent to about nine times the affected areas, such as protection of areas near the mine site, tree replanting after the installation of pipelines, and tree replanting on the mine site after the closure of the mine. For this biodiversity program and its offsets, we are taking a comprehensive approach that controls not only the impact of businesses, but impacts received prior to them as well.

Ambatovy Sustainability Report2021

Survey and conservation of endangered plants
Survey and conservation of endangered plants
Coquerel's Sifaka (Propithecus coquereli), endangered species
Coquerel's Sifaka (Propithecus coquereli), endangered species
Reforestation after logging
Reforestation after logging
Diademed sifaka (Propithecus diadema), critically endangered species
Diademed sifaka (Propithecus diadema), critically endangered species
DFF Inc.

BBOP participating through the Ambatovy Project(Business and Biodiversity Offsets Program)

Business and Biodiversity Offsets Program (BBOP) is an initiative to prepare international standards regarding biodiversity offsets, participated in by companies, governments, NGOs and other specialists. The BBOP initiative ended successfully and is now recognized as an international standard for biodiversity offsets that is also referred to by the Convention on Biological Diversity. The Ambatovy Project in Madagascar continues to comply with this standard while maintaining a balance between conserving biodiversity and the lives of local residents.

BBOP Principles on Biodiversity Offsets

1 Adherence to the mitigation hierarchy: A biodiversity offset is a commitment to compensate for significant residual adverse impacts on biodiversity identified after appropriate avoidance, minimization and on-site rehabilitation measures have been taken according to the mitigation hierarchy.
2 Limits to what can be offset: There are situations where residual impacts cannot be fully compensated for by a biodiversity offset because of the irreplaceability or vulnerability of the biodiversity affected.
3 Landscape Context: A biodiversity offset should be designed and implemented in a landscape context to achieve the expected measurable conservation outcomes taking into account available information on the full range of biological, social and cultural values of biodiversity and supporting an ecosystem approach.
4 No net loss: A biodiversity offset should be designed and implemented to achieve in situ, measurable conservation outcomes that can reasonably be expected to result in no net loss and preferably a net gain of biodiversity.
5 Additional conservation outcomes: A biodiversity offset should achieve conservation outcomes above and beyond results that would have occurred if the offset had not taken place. Offset design and implementation should avoid displacing activities harmful to biodiversity to other locations.
6 Stakeholder participation: In areas affected by the project and by the biodiversity offset, the effective participation of stakeholders should be ensured in decision-making about biodiversity offsets, including their evaluation, selection, design, implementation and monitoring.
7 Equity: A biodiversity offset should be designed and implemented in an equitable manner, which means the sharing among stakeholders of the rights and responsibilities, risks and rewards associated with a project and offset in a fair and balanced way, respecting legal and customary arrangements. Special consideration should be given to respecting both internationally and nationally recognised rights of indigenous peoples and local communities.
8 Long-term outcomes: The design and implementation of a biodiversity offset should be based on an adaptive management approach, incorporating monitoring and evaluation, with the objective of securing outcomes that last at least as long as the project’s impacts and preferably in perpetuity.
9 Transparency: The design and implementation of a biodiversity offset, and communication of its results to the public, should be undertaken in a transparent and timely manner.
10 Science and traditional knowledge: The design and implementation of a biodiversity offset should be a documented process informed by sound science, including an appropriate consideration of traditional knowledge.
DFF Inc.

Bird-strike Prevention in Wind Power Generation

Dorper Wind Farm generates electricity using wind in a mountainous area of about 130 km2 in Eastern Cape, South Africa. In the Doper wind power generation project, measures to prevent bird strikes are implemented.

Windmills are installed in pastures and bird strikes are caused by birds that flock to feed on the carcasses of livestock and other animals. We therefore ensure to remove animal carcasses found in the power plant.

We also hire local residents to visually confirm if there is any endangered bird species circling around the windmills and, if detected, to send an emergency notice to stop the operation of the windmills. It is our aim to achieve a harmonious balance between wild animal conservation and wind power generation business.

Dorper Wind Farm Pty Ltd. in South Africa
Dorper Wind Farm Pty Ltd. in South Africa
DFF Inc.

Bird Friendly® Coffee

Sumitomo Corporation Group has imported and supplied Bird Friendly®-certified coffee (BF®-certified coffee) since 2004 as part of our biodiversity-friendly activities, which ensures a stable income for farmers. Since FY2014, SC Foods Co., Ltd. started dealing in BF®-certified coffee. BF®-certified coffee is grown under the shade of natural forest trees to conserve the environment and provide migratory birds a place to rest. The BF certification was created by the Smithsonian Migratory Bird Center (SMBC). As of June 2023, 49 farms and agricultural cooperation in 12 countries*1 are certified and part of the proceeds are used for SMBC's research, surveys and conservation activities.

Bird Friendly® Coffee

In 2019, this project was recognized by the Japan Committee of the International Union for Conservation of Nature and Natural Resources (IUCN) as a cooperative project authorized by the Japan Committee for the United Nations Decade on Biodiversity (UNDB-J)*2. This authorization means that the project is an important activity to conserve biodiversity as well as an activity that has achieved results toward meeting the Aichi Biodiversity Targets*3. We will continue our efforts to contribute to protecting migratory birds and ecosystems through this project.

  1. 12 countries: Ethiopia, Peru, El Salvador, Columbia, Guatemala, Nicaragua, Bolivia, Honduras, India, Thailand, Mexico, Venezuela
  2. The committee was established in September 2011 to encourage the participation and cooperation of all sectors in Japan to promote efforts to conserve biodiversity and ensure its sustainable use.
  3. New international targets to conserve biodiversity, which were adopted by the 10th Conference of Parties (COP10)
Harvest of BF®-certified coffee
Harvest of BF®-certified coffee
This project has been recognized as a project recommended by the Japan Committee for the United Nations Decade on Biodiversity (UNDB-J).
This project has been recognized as a project recommended by the Japan Committee for the United Nations Decade on Biodiversity (UNDB-J).
DFF Inc.