China Modern Dairy Holdings Ltd

The company does not have a science-based emission reduction target.

The company has set a quantitative target to reduce carbon emissions by 7% in 2025, 15% by 2030 and 20% in 2035. It does not disclose whether it has set targets to reduce GHG emissions from Scope 3.

The company does not discuss whether it is working with suppliers to reduce emissions from agriculture.

The company does not engage in innovative projects to reduce or mitigate emissions from feed farming

The company has implemented emission reduction actions such as installing induction permanent magnet motors, precision spraying and energy-saving lighting. However, those measures only cover some pilot farms.

The company discloses its Scope 1 emissions were 1,654,588.91 tCO2e and Scope 2 emissions were 410,249.01 tCO2e in 2022.

The company does not disclose any information on GHG emissions from animal farming. The company does not disclose any information on GHG emissions from feed production. The company does not disclose any information on GHG emissions from land use change.

The company has responded to CDP Climate Change 2023. It mentions that the China Classification Society Quality Assurance Co., Ltd, the certification body of the Certification and Accreditation Administration of the PRC, audit the GHG emissions data.

The company's total emissions (Scope 1 and 2) increased from 1,325,668.02 tCO2e in 2021 to 2,064,837.92 in 2022. It discloses that the existing pastures decreased the carbon emission intensity in manure management by 10.4% in 2022 compared to 2021.

The company pays attention to climate change and has established a risk management system that integrates climate risks to identify risks and opportunities in the entire value chain. However, it does not disclose that it conducts climate-related scenario analysis.

The company undertakes measures to deal with the risks of feed supply interruption and price fluctuations. It develops a strategic plan for centralised reserves to avoid supply disruptions due to climate change. It regularly holds market analysis meetings for bulk raw materials to analyse market fluctuations caused by climate change. The company discusses measures to alleviate and reduce heat stress on its cattle. It discloses that global warming affects the incidence of vector-borne zoonotic disease, leading to a rise in the demand for pharmaceuticals and veterinary medicine to mitigate and adapt to increased veterinary and treatment costs. It works with the Purchasing Department and other functional departments where they discuss, revise and improve the drug procurement catalogue and regularly conduct tests and comparative analyses of similar drugs to select alternative medicines. The company will also strengthen the veterinary talent reserve team to ensure that each farm is equipped with veterinarians and take adequate measures to reduce the incidence of dairy cows and the use of drugs from the source. It actively optimises the structure of energy use, promotes the use of clean energy and increases investment in comprehensive energy construction to cope with rising energy prices and reduce production costs. It mentions the financial risk of carbon tax and the carbon trading market in China. However, it does not discuss the risk of carbon taxes on electricity or animal protein. The company states that no significant risk events occurred during the reporting period, and all the risks were preventable and controllable. However, it does not explicitly mention that no financial losses occurred.

The company does not disclose its commitment to align capital expenditures with its GHG targets.

The company discloses that the amount of soy purchased accounts for 5% of the total proportion of feed. It recognises that the cultivation of soybeans is a cause of deforestation. 70% of the soybean meal purchased by the company comes from the COFCO Group, and, in May 2022, this company committed to establishing a soybean supply chain that does not involve deforestation in environmentally sensitive areas of Latin America, such as the Amazon, Cerrado, and Gran Chaco. However, the company does not disclose whether the soy from other suppliers is sourced from deforestation-free areas. The company has established a risk management system that identifies climate risks and opportunities in the entire value chain. It discloses deforestation risk in the upstream value chain is managed by actively promoting the traceability of raw materials purchased and cooperating with key, first-tier suppliers to pilot deforestation risk-free procurement. However, the company does not explicitly state that it conducts a soy-related risk assessment or whether it has identified locations at a high risk of deforestation.

The company procures 70% of its soybean meal from the COFCO Group, which has a 2030 zero deforestation target. However, China Modern Dairy does not yet have a deforestation commitment.

The company does not report progress against its commitment. Nor did it responded to the CDP Forest Questionnaire in 2022.

The company states in its Supplier Code of Conduct that it encourages suppliers to acquire deforestation-free certification but does not explicitly mention soy. It discloses it manages deforestation risk in the upstream value chain by actively cooperating with key, first-tier suppliers to implement a deforestation risk-free procurement pilot project. However, no further details regarding the project's progress are provided.

The company states that suppliers must take measures to reduce the negative impact on the environment, comply with all applicable environmental laws and regulations, encourage deforestation-free certification and conserve biodiversity. They must report compliance with this Supplier Code of Conduct regularly, accept third-party review and evaluation, and continuously improve. However, the company does not disclose a supplier policy on soy deforestation beyond encouraging certification, so what suffices as compliance remains unclear. The company discloses that it sources 70% of soybeans from the COFCO Group, which has achieved 100% traceability of all soybeans directly purchased from Matopiba. However, the traceability of soy sourced outside of Matipoba is not disclosed.

The company states within its biodiversity statement that it pledges to protect and restore the native or indigenous vegetation on the land it operates and to maintain soil health, prevent soil erosion, and increase carbon sinks. However, whether these commitments are linked to the company's feed production or sourcing is unclear.

The company sources soybean, cottonseeds, corn, and alfalfa for feed. The company encourages and guides suppliers to build a systematic water resource management plan and establish water-saving goals (targets). It also provides information on water-saving practices in feed farming, including irrigation methods. The company describes introducing shallow-buried drip irrigation technology, which integrates water and fertiliser application, through which water is directly supplied to plant roots, reducing both water and nutrient waste.

The company states that it aims to reduce the water consumption per head of cattle in 2022 by 25% compared with 2021. However, it does not disclose feed water intensity. It discloses the proportion of feed it sources by ingredient. However, it does not reveal the proportion of feed sourced from water-stressed areas. The company discloses that it aims to select and breed forage grass varieties suitable for local drought tolerance and water saving. However, the company does not provide further information.

The company does not disclose the proportion of animal protein commodities produced and sourced in water-stressed areas. The company discloses investing in technology to reduce water consumption at animal farms.

The company has not established partnerships with third parties to input into sourcing/farming strategy, including water use.

The company carries out third-party testing and monitoring of pesticide residues on soy products and provides time-limited rectification or supplier approval management for non-compliance to avoid soil pollution due to excessive use of pesticides. However, the company does not disclose if nutrient management plans are part of the supplier code of conduct, and it is unclear if the company requires feed suppliers to have a nutrient management plan in place. The company also disclosed information about projects where organic fertiliser sourced from cattle manure is applied to crops. The company states that this can reduce the amount of chemical fertiliser used. The company states that it has formed a partnership with leading modern animal husbandry enterprises to drive consortium members to grow high-quality corn and wheat. However, it is unclear if nutrient management or fertiliser use forms part of this guidance.

The company discloses investing in a circular economic model, combining cattle raising, biogas production and feed production. Manure is transported to fields through pipelines, which improve soil health, reduce chemical fertiliser use and improve crop production. However, the company does not explicitly state whether the goal of this project is to improve nutrient management in feed farming operations. It carries out third-party testing and monitoring of pesticide residues on soy products to avoid soil pollution due to excessive use of pesticides. However, the company does not have a target to minimise pesticide use or disclose further information about pesticide use in its feed supply chain.

The company discloses that large-scale biogas generation facilities have been installed at each farm, including slurry treatment. It utilises the WRI water risk map assessment model and tools alongside the 2021 China Water Resources Bulletin and the 2021 China Environmental Status Bulletin published by the Ministry of Water Resources of China to assess water scarcity and quality risks. The assessment covers entire operating regions, and the company discloses that five of the nine regions in which it operates have inferior water quality based on its assessment. According to the company, the regions with inferior quality are the Sebei Region, Northeast Region, Northeast Region, Northern China Region, and Bameng Region. Two regions were assessed as excellent (Eastern China Region & Northwest Region) and two as medium in water quality (Inner Mongolia Region & Central China Region). However, the company does not provide details of this assessment at a farm level, and we recommend that the company provide this moving forward.

The company conducts a risk assessment to identify the social and environmental conditions at each operational site. It also performs a quality assessment of local soil capacity.

The company discloses that it is developing feed to include raw materials which can be more readily digested and absorbed by cattle. The company states that this feed selection improves the utilisation rate of nutrients in feed, reducing the discharge of cow manure in farms and thereby reducing the pollution load to the surrounding environment. It has a biodiversity statement where it pledges to abide by the relevant regulations and requirements of national and local environmental protection. It also supports and participates in biodiversity-related research to not cause harm in its areas of operations. However, it does not mention community engagements concerning biodiversity conservation and protection.

The company maintains a comprehensive antibiotics policy governing the use of antibiotics in livestock, committing to therapeutic use only. It has also adopted extensive measures to curtail disease incidence, including vaccination programmes, health monitoring, stringent testing, advanced breeding technology, dietary enhancements with probiotics, and reduced livestock density. However, it does not specify the class of antibiotics encompassed within its policy.

The company disclosed that antibiotics were administered to 5% of all cows across its farms during the 2022 reporting period, maintaining a consistent percentage from the previous year.

The company aligns its animal welfare principles with the Five Freedoms and commits to employee training on milking procedures and cow health. Protocols are in place for animal welfare policy breaches. However, it does not disclose specific actions taken in response to such violations.

The company commits to animal welfare through its Dairy Cow Comfort Management System, incorporating non-slip flooring and avoiding strict confinement. It also ensures cattle transit welfare by maintaining steady speeds and providing water. However, it lacks disclosure on space allocation for individual animals and procedures such as dehorning, tail docking, or branding. Furthermore, there is no established benchmark for transportation duration.

The company is in compliance with national standards of good agricultural practices concerning animal welfare and has secured the China Good Agricultural Practice Certificate (GAP). The company holds China Good Agricultural Practice (GAP) farm assurance certification and additional certifications from the China Association for Standardization (CAS), including the "Farm Animal Welfare Requirements for Cows" and the "Farm Animal Welfare Products". Given its vertically integrated business model, GAP covers all operations.

The company discloses animal welfare metrics including lameness, mastitis incidence, quarantine rates for culled cattle, foot-and-mouth disease vaccination coverage, and antibiotic usage rates in 2022. However, it did not report on the incidence of hoof disease in cattle, a metric included in the 2021 disclosure.

The company commits to strict monitoring of lameness and mastitis rates, both of which are reported to be below 10%. It also commits to prohibiting tethers and ensuring comfortable bedding for animals.

The company commits in writing to follow all internationally recognised human rights policies stated in the United Nations Universal Declaration of Human Rights, the International Convention on Human Rights and the core conventions of the International Labor Organization.

The company does not discuss how it monitors, assesses and mitigates actual and potential human rights risks in its own operations or supply chain.

The company does not disclose if it conducted a due diligence process and identified human rights risks.

The company commits in writing to prohibit abuse, child labour, forced labour and discrimination and requires suppliers to comply with these commitments. However, it does not disclose conducting audits covering these policies, providing a wage at least in line with the cost of living or granting all its employees paid medical or sick leave.

The company discloses that it conducts regular, irregular and random third-party supplier audits. However, whether these audits are related to the fair working conditions commitments it requires of its suppliers is still being determined. The company reports that it has established anonymous reporting and grievance channels, which include employee hotlines and suggestion boxes. These mechanisms have been selected due to active negotiations with unions and employees. However, the company does not discuss having a grievance mechanism accessible to suppliers. The company discloses that it did not receive any complaints of violations of the rights of its employees through the grievance channels in the reporting year.

The company attaches great importance to production safety by establishing a safety production management system and commits to abide by various national and international safety laws. Twenty-seven of its legal entities have successfully passed the ISO 45001 occupational health and safety management system certification, which equates to just over half of the company's farms. Also, the company has established a safety production committee to monitor and improve safety in the group's operations. However, the company does not disclose the percentage of its sites with a health and safety committee with worker representatives.

The company discloses that the number of days lost due to work-related injuries was 777 in the reporting year, whilst the figure in the previous year was 1,310. The company discloses zero fatalities in the reporting year, demonstrating an improvement compared to last year when the company experienced one work-related fatality. During the reporting period, the employee turnover rate was 1.57%. The company also discloses the rate of employee turnover disaggregated by seniority level. 1.73% was the annual turnover rate of junior employees, 0.39% for mid-level management and 0.00% for senior management.

The company primarily operates in China, where it cannot legally support freedom of association. The company helps its workers' rights to bargain collectively, participate in labour union activities, and communicate with management. This is done through an employee congress to promote communication between employees, the labour union, and upper management. It also supports collective negotiation through bulletin boards and labour dispute coordination committees. Moreover, the company expects its suppliers to follow its supplier code of conduct, which includes an expectation to respect the right of all employees to form and join unions and engage in collective bargaining voluntarily.

During the reporting period, the company discloses that collective bargaining agreements cover 1.51% of its employees. In addition, the company states it does not employ any part-time employees and that all employees are regular full-time direct employees.

The company mentions that it complies with national standards of good agricultural practices regarding food safety and has obtained the China Good Agricultural Practice Certificate (GAP). GlobalGAP, a GFSI-recognised certification, accepts Level 1 of this certification. However, it does not disclose the proportion of sites certified to the China GAP and is encouraged to do so. It discloses that food safety reviews are carried out from the aspects of supplier management. However, it does not mention that its suppliers are expected to have GFSI certification.

The company's Quality Assurance Department conducts monthly quality reviews of the food safety process and regular monthly inspections and reviews in line with an inspection checklist. In 2022, it reported zero food safety incidents. Therefore, it can be inferred that this resulted in a corrective action rate of zero. However, it needs to disclose whether it is developing or implementing a consumer-facing technology for food safety.

The company has established a sound internal management system to improve quality and safety management. However, further description of the product recall system needs to be provided. It had zero product recalls during the reporting period.

The company reports that there were no market bans in the reporting period, and none were detected in the media screening.

The company's board of directors is responsible for ESG-related strategies and reports, including evaluating and identifying environmental, social and governance risks. In addition, the company has carried out a materiality analysis by engaging with various stakeholders regarding the relevant ESG issues to the company and stakeholders. The board of directors determines the materiality of ESG issues. Some of the material topics identified by the company include product quality, customer service and communication, community communication, product innovation, water management, epidemic prevention of dairy cows, biogas slurry (biogas) management, green supply chain and quality control of the entire industry chain. One board member has innovation expertise, but no board-level knowledge on food safety or sustainability is discussed.

The company does not mention whether it sets executive monetary remunerations linked with sustainability performance. The company engaged in climate change by participating in the 27th meeting of the UN Climate Change Conference. Still, it did not disclose engaging civil or trade associations on other ESG issues. The company does not disclose a complete list of trade association memberships or discuss aligning its policy-engagement strategy to restrict global temperature rise to 1.5°C.

The company won a science and technology innovation award for an innovative manure treatment system. This system is advancing environmentally friendly treatment in the industry by using solid-liquid separation and film-covered fermentation. The company also discusses its ranking amongst Chinese Companies by the Coller FAIRR Protein Producer Index.

The company does not explicitly acknowledge that protein diversification is a material business issue. Further, it has not yet set a timebound target to diversify protein sources, nor does not report revenue/sales linked to alternative protein sources

The company states it continuously optimises and expands the types of raw feed materials it procures to realise the diversification of raw milk protein. These include soybeans, rumen bean meal, beer's spent grains, sesame meal and spray corn bran. However, it does not indicate having an approach towards diversifying its product range to include plant-based and alternative proteins.