China Modern Dairy Holdings Ltd

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

The company has set adjusted carbon emission targets, using 2021 as the base year. It aims to reduce carbon emissions per kilogram of fat-and-protein-corrected milk (FPCM) by 7% by 2025, 15% by 2030, and 20% by 2035. However, it has not disclosed any targets for reducing Scope 3 GHG emissions.

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

The company is committed to innovative forage planting models, exploring multi-category strategies to enhance crop yield and productivity. Although it does not explicitly link this effort to reducing feed farming emissions, it is mentioned within the context of integrated planting and rearing systems. The company is gradually expanding carbon sink reserves by improving grassland and increasing artificial forage planting to minimise greenhouse gas emissions and aim for carbon neutrality in farming and husbandry. Its artificial alfalfa land at Helin Farm is a perennial grassland with high biomass, contributing significantly to soil carbon sequestration.

The company reports that it has improved the digestibility and utilisation efficiency of feed to reduce carbon emissions from cattle, as part of refining feeding practices and enhancing quality. It is also implementing a whole-farm action plan, "Low-carbon Dairy Cow Breeding", to determine non-CO2 GHG emission factors in intensive dairy farming using measured data. Additionally, it plans to develop a Scope 3 carbon emission accounting system and evaluate emissions from domestic large-scale farms. To reduce emissions, the company has taken measures to enhance farm efficiency, including installing induction permanent magnet motors, precision spraying systems, induction fans, automatic switches, and energy-efficient lighting across all facilities.

In FY2023, the company reported Scope 1 emissions of 1,946,733 tCO2e and Scope 2 emissions of 362,578 tCO2e.

The company reports Scope 1 and 2 emissions from its Livestock Business increased to 2,301,960 tCO2e in 2023 from 2,057,600 tCO2e in 2022. Emissions from its Feed Production Business decreased slightly to 7,237,470 tCO2e in 2023 from 7,353,490 tCO2e in 2022, including data from feed-pressing plants. However, it does not disclose Scope 3 emissions from feed or GHG emissions from land-use change.

The company responded to the CDP Climate Change 2023, but the response is not publicly available. Additionally, it passed the GHG Emission Verification by China Classification Society Quality Assurance Co., Ltd., receiving ISO14064-1:2018 certification.

The company's total emissions, including Scope 1 and 2, rose from 2,064,838 tCO2e in 2022 to 2,309,312 tCO2e in 2023, marking a 74.2% increase since 2021. This equates to an average annual increase of 37%. In FY2023, the company reports Scope 1 emissions of 1,946,733 tCO2e and Scope 2 emissions of 362,578 tCO2e. Between FY2022 and FY2023, the company achieved a decrease in enteric fermentation emissions by approximately 2% and in manure management emissions by 4.3%.

The company does not disclose information on a climate-related scenario analysis.

The company acknowledges the risks associated with feed supply interruptions and price fluctuations due to global catastrophic weather and other factors. To mitigate these, it is developing a diversified feed supply system, enhancing feed efficiency without compromising nutrition, forming strategic partnerships with major suppliers, and researching new feed ingredients to stabilise procurement costs and ensure supply consistency. It is addressing challenges posed by extreme weather conditions on cattle welfare and dairy production. For heat stress, the company is adjusting calf island orientation, adding sunshades, sprinklers, fans, researching nutritional solutions to cool cattle, and increasing water intake. To combat cold stress, it has insulated cowsheds with cotton curtains, provided heated water, and increased feed energy concentration to maintain health and milk production. The company is also improving product quality monitoring, optimising transport, and reducing transit times to prevent raw milk deterioration due to temperature changes. The company reports rising veterinary and pharmaceutical costs linked to increased disease incidence in dairy cows from global warming. To manage fluctuating medicine prices, it conducts regular tests, optimises alternative medicines, and develops long-term partnerships with suppliers. It is also investing in intelligent technology for early disease diagnosis, enabling timely health monitoring and treatment to reduce common diseases. It is optimising its energy structure by promoting renewable energy and investing in energy infrastructure to achieve self-sufficiency in green electricity, enhancing its ability to manage energy supply fluctuations and providing advantages in the carbon market. The company identifies GHG emissions pricing as a significant transition risk, noting that expanding carbon trading markets may increase operating costs. It plans to explore carbon capture, utilisation, and sequestration (CCUS) technologies to reduce emissions and lower the costs associated with carbon emissions by avoiding or reducing the purchase of carbon shares. The company does not disclose the number of financially material events resulting from climate risks during the reporting period.

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

The company reports that soybean is a significant component of its feed production, with 71% of its soybean meal sourced from its tier 1 supplier, COFCO International. It acknowledges the role of soybean cultivation in deforestation and has committed to establishing a deforestation-free soybean supply chain in environmentally sensitive regions of Latin America, including the Amazon, Cerrado, and Gran Chaco, by 2030. However, it has not disclosed whether soy from other suppliers comes from deforestation-free areas. The company conducts ongoing deforestation risk analysis, including within its operations and across the industry chain, and implements measures to address identified risks. Nevertheless, it has not disclosed the specific high-risk locations.

The company has announced a forest policy targeting "zero forest destruction" by 2030. It sources 71% of its soybean meal from the COFCO Group, which also aims for zero deforestation by 2030. The company requires COFCO International, its main soy supplier, to ensure that soybean production areas are free of deforestation risk from 31 December 2020 onwards.

The company states its commitment applies to all soybean meal but does not explicitly clarify if this extends beyond tier-1 suppliers.

The company reports that 71% of its soy purchased in 2023 from COFCO was certified as deforestation-free, requiring a third-party audit report. While the company responded to the CDP Forests Questionnaire in 2023, the information is not publicly available.

The company mandates its raw material suppliers, particularly for dairy cattle, breeding animals, and soybean meal, to handle procurement in a manner that prevents forest destruction, thereby establishing a "zero forest destruction" supply chain. Suppliers must ensure that expanding agricultural or planting land does not lead to deforestation or environmental harm. The company engages with primary suppliers to address deforestation risks in its upstream value chain through a deforestation-free procurement pilot project, though details of its progress are not disclosed. It reports that COFCO International, a key soybean supplier, achieved full traceability for all soybeans sourced directly from Brazilian farmers by 2023. While the company purchases forage from local farmers and provides technical guidance to enhance yield and quality, it does not clarify whether it supports improvements in traceability or deforestation-free production.

The company conducts monthly supplier audits with a "Supplier Audit Form," assessing quality, safety, delivery, and environmental and social risks. Suppliers are categorised as Excellent, Good, Qualified, or Unqualified, affecting their cooperation and audit requirements. Unqualified suppliers must address issues outlined in a "Supplier Rectification Issue Letter," following the "Sustainable Procurement Management Agreement." Required actions include an improvement plan, regular progress reports, and verification. Persistent non-compliance may result in contract termination or reporting to authorities. The company sources 71% of its soybeans from the COFCO Group, achieving complete traceability for soybeans directly procured from Brazilian farmers. However, traceability for soybeans from other regions is undisclosed.

The company claims to prioritise rational land use and biodiversity conservation, incorporating stringent requirements in its practices to minimise ecosystem disruption. However, it is unclear if these measures relate to its feed production or sourcing. The company also promotes local sourcing of feed and forage, but it is uncertain if this is intended to replace soy. Nonetheless, it reports undertaking a project to replace soybean meal with canola meal, resulting in reduced soy usage in 2023.

The company monitors water stress risks at all sites using the WRI water risk map and 2021 China Water Resources and Environmental Status Bulletins. It assesses water scarcity and quality risks to develop targeted measures for project planning and discloses the regions with relative water scarcity. However, it does not confirm whether it operates solely in low-water stress areas. According to its analysis with the WRI model, water stress is relatively scarce in Saibei, Chabei, Northern China, and Bayan Nur, but highly scarce in the Northwest region. The company reports fresh water consumption of 1,682.72 ten thousand m3 for FY2023. It promotes water security by implementing water-saving practices, increasing alternative water sources, and managing sewage discharge compliance. Water efficiency metrics are integrated into performance assessments. Advanced thermal spray equipment in barns saves 39% water and 10% electricity. Innovative irrigation methods, such as shallow-buried drip and pointer sprinkler systems, enhance water-saving efficiency by over 55% compared to traditional methods. Agricultural practices, including soil moisture retention and the use of organic fertilisers, further optimise water use efficiency across operations.

The company does not disclose a time-bound water reduction target to reduce total water withdrawals at facilities in the reporting year.

The company reports its freshwater consumption and withdrawal as 1,682.72 ten thousand m3 for FY2023, with 54.88% sourced from high-water-risk areas. However, there is a need for clarification on this disclosure, including data from other sources. The company invested 1.8 million RMB in precision sprinkler systems in 2023, significantly improving irrigation accuracy and saving 29,661 tonnes of water. Although water-related OPEX is not specified, a management system incorporating a water budget of 16.876 million tonnes is in place. The company submitted to the 2023 CDP Water Security survey, but its response is not publicly available. Water consumption increased from 1,579.27 ten thousand m3 in FY2022 to 1,682.72 ten thousand m3 in FY2023. No third-party audit evidence for its water-related data has been provided.

In its code of conduct, the company requires suppliers to use water resources sustainably by implementing water recycling systems, adopting water-efficient technologies, and establishing robust water management systems. Suppliers are encouraged to reduce water consumption actively and publicly disclose their usage reports to enhance transparency. The company enhances water efficiency in its feed cultivation operations through methods such as shallow-buried drip irrigation and pointer sprinkler systems. It also employs practices to improve soil moisture retention and fertiliser application efficiency. The company reports that its supplier, Shengmu Grasslands, in collaboration with Israel's Netafim, has implemented low-flow drip technology and smart agriculture systems on 25,000 mu of organic land, improving water utilisation efficiency. However, the company has not disclosed whether it has formed its own partnership with a third party regarding water use in feed sourcing.

The company reports that Shengmu Grasslands supplies approximately 300,000 tons of silage to Modern Dairy, utilising around ten annual irrigations on 100,000 mu of land. Through low-flow drip irrigation and smart agriculture systems, water usage is reduced by 16 tons per ton of silage, with each ton of silage traditionally requiring 130 tons of water. To achieve water savings, the company selects appropriate forage grass varieties, improves planting structures, and standardises engineering facilities. It promotes innovative irrigation techniques, such as shallow-buried drip irrigation, which delivers water directly to plant roots, reducing waste and improving water efficiency by over 55% compared to traditional methods. Pointer sprinkler irrigation is also used to simulate natural rainfall, saving approximately 40% in water usage. Additionally, the company enhances soil moisture retention and water use efficiency through deep loosening, inter-tillage weeding, compaction harrowing, moisture-retaining mulching, increased organic fertiliser application, and rational use of microbial fertilisers. It cites a case study in Inner Mongolia, Yellow River, where slope levelling and ridge and furrow seeding improved regional water efficiency. The company also discloses that 50.18% of its silage is sourced from water-scarce areas.

The company reports that 53.12% of its milk is produced in water-scarce areas. It aims to maintain daily water consumption per cow within 110kg over five years from 2020, although this is not a reduction target. The company manages water resources in animal breeding by improving daily operations, conducting system assessments, managing suppliers, and training employees. Further, the company employs water-saving technologies in animal breeding to enhance efficiency. It has installed precise thermal spray equipment at four 10,000-head farms. This intelligent system adjusts its operating status based on real-time data on temperature and humidity, reducing water waste. As a result, it saves an average of 39% of water compared to pre-installation levels.

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

The company monitors water stress risks at its operational sites using the WRI water risk map model to assess scarcity and quality. It discloses assessment results for each operating region. The company states its aim to reduce water consumption per head of cattle but does not disclose a wastewater discharge reduction target. Additionally, it does not disclose instances of non-compliance with water quality permits or standards and has not discussed setting a water-related quality target.

The company has submitted the Water Security 2023 assessment, but the score is not available publicly. It does not disclose the quality or volume of wastewater discharged, nor is its wastewater-related data audited by a third party.

The company does not disclose having improved the wastewater quality at the aggregate level compared to the previous reporting period or reduced the volume of wastewater discharged.

The company encourages suppliers to prioritise pollution-free production methods but does not specify if nutrient management plans are included in the supplier code of conduct. While it employs an organic farming model using manure, there is no disclosed requirement for feed suppliers to have a nutrient management plan. The company invests in water efficiency for feed cultivation through advanced irrigation and soil management to reduce waste and optimise resources. It reports on its "cow-biogas-grass" project, which uses cow dung fermentation to produce organic fertiliser for silage corn, decreasing chemical fertiliser use by 20-25kg per mu and boosting silage production by 0.2 tonnes per mu. Additionally, Hongya Farm in Inner Mongolia has implemented a "Cow-Biogas-Tea" model using biogas slurry as organic fertiliser since 2011, enhancing local agriculture and ecological balance. The company has not partnered with third parties to influence its sourcing or farming strategies concerning nutrient pollution or fertiliser use.

The company has invested in a circular economic model of farming that combines cattle raising, biogas production, and feed production. Manure is distributed to fields via pipelines, improving soil health and reducing chemical fertiliser use. Additionally, it has implemented shallow-buried drip irrigation technology for feed crops, which reportedly enhances fertiliser uptake and reduces nutrient runoff. The company requires its soy product suppliers to comply with pesticide regulations and undergo third-party residue testing to prevent soil pollution from excess pesticide use. In its organic raw material production, no pesticides or chemical fertilisers are used, although this applies to only a limited portion of the sourced feed materials.

The company has implemented advanced manure management systems, including automated collection and closed anaerobic fermentation, to improve biogas production efficiency across all farms. It reports establishing large-scale biogas power generation and comprehensive biogas fertiliser utilisation facilities, which include biogas slurry treatment, to support a green circular industrial chain. The company uses the WRI water risk map assessment model, alongside the 2021 China Water Resources and Environmental Status Bulletins, to evaluate water scarcity and quality risks in its operational regions. It identifies that five of its nine regions, including Sebei, Northeast, Northern China, and Bameng, have substandard water quality. In contrast, Eastern China and Northwest regions are rated as excellent, while Inner Mongolia and Central China are considered medium. However, detailed farm-level assessments are not provided, which is recommended for future reporting.

The company reports that all its farms have biogas digesters to process manure. However, it is unclear if it provides technical or financial support to suppliers or its own farms for developing nutrient management plans and improving manure storage. In 2022, the company conducted quality assessments of local soil capacity to ensure proper manure application. It also formulated a 'Fertilization Management Requirement' to ensure feed quality, though the verification of these practices is not specified.

The company has introduced a new cattle feed containing raw materials that are more easily digested and absorbed. This innovation aims to enhance nutrient utilisation, thereby reducing manure discharge and diminishing environmental pollution. The company has filed an "Emergency Plan for Sudden Environmental Incidents" to comply with national regulations. This plan includes preparedness, response, and recovery procedures, an organised command system, and equipped emergency materials to swiftly minimise environmental and community safety impacts. Furthermore, the company conducts community impact assessments around new sites and maintains a formal grievance mechanism for community members to raise concerns or complaints about its operations. However, it does not integrate nutrient management performance into incentive schemes for farmers.

The company’s antibiotics policy aims to minimise reliance on antibiotics through preventive measures, allowing their use strictly for therapeutic purposes in treating diseased cattle, with rigorous tracking and recording. However, the company does not specify the types of antibiotics covered by this policy. To reduce antibiotic usage, the company employs various strategies, including vaccination programmes, routine health monitoring, improved nutritional support with probiotics, reduced stocking density, rigorous testing, advanced breeding techniques, internal emergency plans for major epidemics, and strict biosecurity protocols for managing sick and deceased cattle. The policy prohibits the routine use of antibiotics, including for growth promotion, ensuring they are used solely for therapeutic purposes.

The company reports an antibiotic use rate of 5% for both 2023 and 2022, showing no reduction in animals treated. It does not disclose antibiotic quantities by type or class, nor does it explain the reasons for antibiotic use during the reporting period. Additionally, the company does not subject its antibiotic usage data to third-party audit.

The company is committed to the internationally recognised "Five Freedoms" of animal welfare, ensuring dairy cattle are free from hunger, thirst, discomfort, pain, injury, disease, fear, and distress, while also allowing for the expression of normal behaviour. This commitment is supported by internal regulations and systems overseeing the physiological, environmental, health, and behavioural welfare of the animals. The company engages and trains employees on animal welfare issues. It provides regular training for breeding staff to ensure adherence to standard procedures and professional training in milking operations, mastitis detection, and other welfare risks, promoting minimal stress breeding. Violations of animal welfare policies are subject to penalties, but the company does not detail specific responsive actions. The company advances animal welfare through extensive research and development, digital intelligence innovations, and use of advanced feeding and monitoring systems. It integrates smart collars for health monitoring and employs automated systems for risk detection.

The company demonstrates its commitment to animal welfare by providing cattle with ample space to express natural behaviours, ensuring no tethering practices. Each lactating cow is given at least 8 square metres of lying space, 10 to 25 square metres of activity space, and outdoor exercise areas that are at least 120% of the lying area. The company takes steps to minimise transport fatigue and maintain animal health during transportation through steady speed, onboard supervision, and vehicles equipped with ventilation and temperature controls. However, there is no explicit commitment to limiting transportation time to 8 hours or less. To enhance animal welfare, the company offers enriched environments, including comfortable shelters with non-slip floors, soft bedding, and well-ventilated and temperature-controlled cowsheds. Although the company prioritises the physical and mental health of cows with scientific breeding, customised nutrition, and precise feed delivery, it does not commit to avoiding breeds with problematic traits or emphasise welfare traits over production traits. The focus is on maximizing genetic potential and specific production characteristics. The company does not disclose commitments to avoiding routine mutilation, such as dehorning, tail docking, or branding of cows, nor does it disclose a commitment to humane slaughter.

The company's dairy operations through its subsidiary, Modern Farming (Shanghe) Co. Ltd., are certified by the Farm Animal Welfare Product Certification. However, this certification applies only to specific farms, indicating that not all of its dairy operations are certified under this programme.

The company provides annual reports on animal welfare progress, highlighting key performance metrics. The lameness rate decreased from 0.53% in 2022 to 0.45% in 2023, while the incidence of mastitis reduced from 1.62% to 1.35%. Furthermore, the company maintains a 100% culling quarantine rate and full foot-and-mouth disease vaccination coverage for dairy cows.

The company effectively addresses key welfare risks in dairy operations. Tethering is avoided, used only for short-term welfare procedures. Lameness prevalence is maintained at 0.45%, well below the 10% threshold, and mastitis incidence is at 1.35%, significantly lower than the benchmark of 25 new cases per 100 cows per year. The company also ensures suitable environments with eco-friendly bedding, providing clean and comfortable conditions for dairy cows.

The company is committed to upholding human rights across its operations and supply chain, adhering to international standards such as the Universal Declaration of Human Rights and the International Convention on Human Rights.

The company conducts annual human rights risk assessments, including audits, for its operations and provides human rights training to employees each year. However, it does not provide sufficient detail on conducting human rights due diligence within its supply chain or how it mitigates risks and remediates affected people or communities. While suppliers are audited on environmental and social criteria, including working conditions and forced labour, the company does not disclose how it determines the next steps after identifying human rights risks in its operations, beyond providing feedback to management. Suppliers rated as "Unqualified" must undertake a rectification plan, which may involve completing an improvement plan, terminating business contracts, and/or reporting non-compliance to relevant stakeholders.

The company does not disclose whether it has identified any human rights risks in its operations through human rights due diligence.

The company prohibits child labour, forced labour, discrimination, and harassment, promoting freely chosen employment. It claims to offer competitive remuneration but does not ensure wages align with the cost of living. Human rights audits are conducted according to its policy, which includes prohibiting harassment and discrimination. However, it is unclear if these audits cover child or forced labour. The company requires suppliers to forbid abuse, harassment, child labour, forced labour, and discrimination. Suppliers are also expected to pay wages that meet basic needs and allow some disposable income. All employees are covered by occupational disease medical examinations and supplementary and commercial insurance. However, there is no mention of paid sick leave.

The company conducts ESG audits of suppliers using a supplier audit form that includes criteria for safe working conditions and forced labour. However, it is unclear if all relevant policies are covered in these audits. The company has established anonymous reporting and grievance channels, including employee hotlines and suggestion boxes, and its whistleblowing channel is open to external stakeholders. However, it does not specify if stakeholders were consulted in the design of these mechanisms. The company reports no incidences of discrimination or harassment via its grievance channels in 2023, but it does not clarify if other types of grievances were reported.

The company highlights its commitment to employee health and safety, with 31 out of 42 dairy farming operations achieving ISO 45001 certification for occupational health and safety management systems. It employs a three-tier safety structure, including a Production Safety Committee responsible for safety planning, regular meetings, and setting safety targets. However, the company does not disclose any information on assessing and addressing antimicrobial resistance risk for its workforce.

The company reports a Lost Time Injury Frequency Rate (LTIFR) of 0.49 and 814 days lost due to work injuries for FY2023, an increase from 777 days lost the previous year. While there were no fatalities in 2022 or 2023, the correlation between the change in days lost and the LTIFR remains unclear, as only the current year's LTIFR is provided. Additionally, the company has a turnover rate of 1.54% for 2023, with a breakdown by gender, age, and region, but not by seniority.

The company states that it respects its employees' rights to freedom of association and collective bargaining. However, due to the majority of its operations being based in China, it is legally unable to support freedom of association there. It has implemented channels for employee engagement with upper management, such as executive communication meetings and a worker-representative congress, but does not disclose specific measures to support collective bargaining for the reporting year. The company requires its suppliers to respect legal rights regarding free association, union membership, representation, and collective bargaining for employees.

The company respects workers' right to bargain collectively. Its workforce comprises solely regular full-time direct employees, with no subcontracted or part-time staff.

The company describes its food safety system, including ISO 9001 certification, but does not mention HACCP or any GFSI-recognised schemes. Additionally, the company does not require suppliers to have GFSI certification, nor does it disclose the proportion of suppliers with such certification.

The company conducts comprehensive annual audits on product quality and food safety, completing 10 projects in 2023 with no reported food safety incidents, implying a corrective action rate of 0. It employs a digital traceability system for raw milk quality and safety, although this technology is not specified for direct consumer use, and is mainly focused on internal quality management and optimisation.

The company operates a product recall system overseen by a "Food Recall Command Team" within its Food Safety Team, specifically targeting unsafe raw milk products. This system includes protocols, roles, responsibilities, and procedures for conducting passive and active recalls based on food safety hazard assessments. It features a communication plan for promptly notifying customers and authorities, along with mechanisms for tracing, recovering, and disposing of affected products. All processes are comprehensively documented for compliance and review. The company reports no recalls related to product quality during the reporting period.

The company does not disclose the number and locations of market bans for the reporting year, and no such bans were detected through media screening.

The company's Board of Directors holds ultimate responsibility for overseeing ESG issues and developing its "FRESH Sustainable Development Strategy," ESG policies, and action plans. A Sustainability Committee, accountable to the Board, assists in decision-making, reviews ESG matters, and provides management suggestions. The company has conducted a materiality analysis with both internal and external stakeholders to identify relevant ESG issues. Material topics identified include product quality, the "Dual-carbon" project, sustainable procurement, biodiversity, and employee wellbeing. Although the vice president, Mr MA Lijun, has expertise in food safety and quality management, and board member Mr LI Shengli has notable experience in dairy research, none of the board members have expertise in sustainability.

The company links ESG performance to executive remuneration, with a minimum of 5% weight assigned to targets including carbon emission reduction, water use efficiency, biodiversity protection, safety and health, community relations, human rights, supplier risk management, and business ethics. However, the company does not disclose whether it engages with public policy officials or trade and civil associations on ESG issues, nor does it provide a complete list of trade association memberships. Additionally, the company does not commit to aligning its policy engagement activities with the goal of restricting global temperature rise to 1.5°C.

The company has improved energy efficiency and resource optimisation by implementing innovative measures, including the use of photovoltaic and biogas power to reduce costs and support green energy. It claims to achieve 100% manure utilisation through its circular production model involving anaerobic fermentation and biogas systems. The company also discusses its MSCI rating, indicating some awareness of its sustainability performance compared to peers.

The company does not explicitly acknowledge that protein diversification is a material business issue. Furthermore, it has not yet set a time-bound target to diversify protein sources, nor does it report revenue or sales linked to alternative protein sources.

The company does not indicate an approach to diversifying its product range to include plant-based and alternative protein options.