Leroy Seafood : TCFD Report 2023

TCFD Report 2023

Contents

Lerøy's Sustainability Ambition	3
TCFD Recommendations	4
Governance	7
Strategy	10
Risk Management	27
Metrics and Targets	28
Scenario analysis
Methodology and Background	31
Scenarios	33
Sources and references	46

Lerøy Seafood Group

TCFD Report 2023

Contents	Sustainability Ambition > TCFD Recommendations > Governance > Strategy > Risk Management > Metrics and Targets > Scenario Analysis	3

Lerøy's Sustainability Ambition

Lerøy Seafood Group (hereinafter called LSG or the Group) aims to create the world's most efficient value chain for sustainable seafood. To achieve this goal, we will explore a range of strategies that focus on reducing our greenhouse gas emissions, help us establish responsible business practices, and drive the transition to a low-carbon economy. The Group will also investigate the opportunities that climate change is creating and the way in which climate change is affecting our wider value chain.

About Lerøy

Seafood Group

Lerøy Seafood Group is a fully integrated and world-leading seafood supplier, with more than 70 subsidiaries around the world and a history dating back to 1899. The Group has three core business segments: the production of salmon and trout ("Farming"), the catching and processing of white fish ("Wild Catch"), and the processing, product

development, marketing, sales, and distribution

To reduce its carbon footprint, the Group has set ambitious targets for decreasing its greenhouse gas emissions. Through the Science Based Targets initiative (SBTi), LSG has committed to reducing its overall Scope 1, 2, and 3 emissions by 46% by 2030. Lerøy has an ambition to be climate neutral by 2050.

To mitigate and manage risks related to climate change that have a potential to affect our operations, we devote considerable resources to identifying the risks and implementing measures to safeguard our operations. We also explore the opportunities that climate change can give us and investigate if it can strengthen our operations. The Group has implemented several measures and awareness campaigns to ensure that all employees in our various subsidiaries are aware of how they can affect greenhouse gas emissions in

their daily operations. As a starting point, all employees have been given the opportunity to complete an online training course on environmental, social and economic sustainability factors. The purpose of these initiatives is to raise awareness as well as enable the employees to make sustainable choices in their everyday work life.

The Group is currently re-calculating its Science-Based Target base year (2019) and will submit its recalculated application to the SBTi. The Group will also set a Forest, Land, and Agriculture (FLAG) Science-Based Target and submit an application to the SBTi in accordance with its recommendations and given time horizon. This work will commence when an updated version of the GHG Protocol: Corporate Accounting and Reporting Standard is published in Q2 2024.

of seafood ("VAP (value- added products), Sales &

Distribution").

We currently employ around 6,000 people worldwide, delivering seafood to shops, restaurants, canteens, and hotels in more than 80 countries.

We are a proud supplier of seafood, delivering

approximately 5 million meals every day.

Our head office is located in Bergen, Norway. Lerøy has fishing vessels and fish farms in operation along the entire Norwegian coast. In addition

to production and packaging plants in Norway, we have processing and distribution in Sweden, Denmark, Finland, France, the Netherlands, Portugal, Spain, Italy, and Turkey. We also have sales offices in the UK, USA, Japan, and China.

Lerøy Seafood Group

TCFD Report 2023

Contents	Sustainability Ambition >TCFD Recommendations > Governance > Strategy > Risk Management > Metrics and Targets > Scenario Analysis	4

TCFD Recommendations

The recommendations issued by the Task Force on Climate-related Financial Disclosure (TCFD) are widely adoptable and applicable to organizations across sectors and jurisdictions. The recommendations are designed to solicit decision- useful, forward-looking information that can be included in mainstream financial filings.

There is an increasing call for decision-useful, climate- related information, and creditors and investors are progressively demanding access to risk information that is consistent, comparable, and clear.

TCFD has developed its disclosure recommendations to augment market transparency and stability.

Additionally, TCFD encourages the use of a standardized reporting structure for financially material climate-related risks and opportunities to give investors, lenders, and insurers enhanced comparability when assessing and pricing pertinent companies.

The TCFD recommendations are structured around four thematic areas that represent core elements of how organizations operate: governance, strategy, risk management, and metrics and targets. Moreover, the framework separates into three main categories: risks related to the transition to a lower-carbon economy, risks related to the physical impacts of climate change, and climate-related opportunities. The TCFD has also

incorporated financial impact as an integral part of its disclosure recommendations.

In line with the TCFD disclosure recommendations, TCFD is an integrated part of LSG's annual financial reporting, and the report is reviewed by the Audit Committee and the Board annually.

Governance

Strategy

Risk

Management

Metrics and

Targets

Governance

The organization's governance around climate-­ related risks and opportunities

Strategy

The actual and potential impacts of climate-­ related risks and opportunities on the ­organization's business, strategy, and ­financial planning

Risk Management

The process used by the organization to ­ identify, assess, and manage climate- related risks

Metrics and Targets

The metrics and targets used to assess and manage relevant climate-related risks and opportunities

Lerøy Seafood Group

TCFD Report 2023

Contents	Sustainability Ambition >TCFD Recommendations > Governance > Strategy > Risk Management > Metrics and Targets > Scenario Analysis	5

TCFD Content Index

Governance	Strategy	Risk Management	Metrics and Targets
Disclose the organization's govern-	Disclose the actual and potential	Disclose how the organization	Disclose the metrics and targets
ance around climate-related risks	impacts of climate-related risks and	identifies, assesses, and manages	used to assess and manage
and opportunities.	opportunities on the organization's	climate-related risks.	relevant climate-related risks and
	business, strategy, and financial		opportunities where such informa-
	planning where such information is		tion is material.
	material.
Recommended Disclosures

1. Describe the board's oversight of climate-related risks and opportu- nities.

1. Describe the climate-related risks and opportunities the organization has identified over the short, medi- um, and long term.

1. Describe the organization's pro- cesses for identifying and assessing climate-related risks.

1. Disclose the metrics used by the organization to assess climate-re- lated risks and opportunities in line with its strategy and risk manage- ment process.

1. Describe management's role in assessing and managing climate-related risks and opportu- nities.

1. Describe the impact of cli- mate-related risks and opportuni- ties on the organization's business- es, strategy, and financial planning.

1. Describe the organization's processes for managing climate-re- lated risks.

1. Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and related risks.

1. Describe the resilience of the organization's strategy, taking into consideration different climate-re- lated scenarios, including a 2ºC or lower scenario.

1. Describe how processes for iden- tifying, assessing, and managing climate-related risks are integrated into the organization's overall risk management.

1. Describe the targets used by the organization to manage climate-re- lated risks and opportunities and performance against the targets.

Lerøy Seafood Group

TCFD Report 2023

Contents	Sustainability Ambition >TCFD Recommendations > Governance > Strategy > Risk Management > Metrics and Targets > Scenario Analysis	6

CDP Climate Change and TCFD

LSG has reported to the Carbon Disclosure Project (CDP) via the CDP Climate questionnaire since 2013, as well as CDP Water (since 2020) and CDP Forests (since 2020). Reporting to the CDP has been an important step for the Group to better identify and manage the climate-related impacts of our business activities. 2022 was the first year where our CDP report was aligned with the TCFD framework. The Group delivered a TCFD aligned report in 2023 as well. Climate scenario analysis was first developed in 2020/2021 and advanced in

2023. TCFD's focus and guidance on our climate-related financial impact and scenario analysis is an important process, both to ensure transparency and to improve our understanding of how climate-related issues can affect us and how we can mitigate expected climate changes in the future.

In 2023, LSG achieved an A- (Leadership) score in the CDP Climate Change section. To earn an A/A- score from CDP, organizations must show environmental leadership, disclosing action on climate change as well as demonstrating best practice in strategy and action. LSG has an ambition to improve its score in

2024 by working systematically with our climate and sustainability strategy and initiatives as well as by further developing our reporting routines to enable more accurate and transparent reporting. Since we started to collect and report our emissions data in 2010, we have established a solid reporting foundation. Our TCFD assessment has played an important role in further developing this, as it helps us to continuously assess what short- and longterm actual and potential risks are relevant to us. Thus, we are able to identify

gaps and build mitigation strategies around them to ensure the future-proofing of LSG.

The EU's Corporate Sustainability

Reporting Directive (CSRD) and

TCFD

The CSRD aims to improve the way companies report sustainability information, as sustainability reporting will in future be placed on an equal footing with financial reporting. Investors will have access to the information they need to assess as well as investment risks arising from climate change and other sustainability issues. The CSRD also incorporates the concept of "double materiality". This means that companies must report not only on how sustainability issues might contribute to financial risks for the company (financial materiality), but also on the company's own impacts on people and the environment (impact materiality). LSG is currently carrying out its double materiality assessment.

CSRD requirements also incorporate the TCFD recommendations.

The CSRD went into effect from January 1, 2024, for reports to be published in 2025.

Lerøy Seafood Group

TCFD Report 2023

Contents	Sustainability Ambition > TCFD Recommendations >Governance > Strategy > Risk Management > Metrics and Targets > Scenario Analysis	7

Governance

The organization's governance of climate- related risks and opportunities.

Board chair

Board member										Employee
with designated		Board member		Board member		Board member		Board member
responibility for						representative
sustainability

Chair of audit		Board member		Head of
	with designated		Auditor
committee		CFO
	responibility for	ESG & Quality
Board member
	sustainability

Lerøy Seafood Group

TCFD Report 2023

Contents	Sustainability Ambition > TCFD Recommendations >Governance > Strategy > Risk Management > Metrics and Targets > Scenario Analysis	8

Board-level oversight

Climate-related risks and opportunities are integrated into LSG's overall governance mechanisms. The Board of Directors has ultimate responsibility for the company management, including oversight of Economic, Social and Governance (ESG) strategic planning, as well as risk and opportunity management. The Board Chair has overall responsibility for the management of climate-­related issues in The Group. The Board has

a responsibility to ensure that the Group's activities pertaining to climate issues are included in the company's strategy. This includes defining, monitoring, and ensuring that climate-related targets are achieved.

The Board has given extended responsibility for ESG issues to one designated Board member. This Board member holds meetings with the Head of ESG & Quality during the year. Discussion points at these scheduled meetings include the Group's ESG and climate-change strategy and its developments, as well as the necessity

Performance objectives are set by corporate manage­ ment and approved by the Board. The performance objectives are measured quarterly, and they also constitute a part of the discussion between the responsible Board member and the Head of ESG & Quality. A report regarding the Group's performance objectives and their development is produced and sent to the Board member responsible for ESG for quarterly review.

Discrepancies and (negative) trends regarding target achievement are reported to the Board, which then decides if any corrective actions should be taken to achieve the defined targets.

Through this structural setup, ESG and climate-related issues receive direct oversight from the Board. We believe that having oversight on the highest executive level is crucial for our success as a sustainable business.

Head of ESG

& Quality

CEO

CFO

COO Farming

COO VAP, sales & distribution

Group

Director HR

for any adjustments to the strategy. They also review policies to be approved and amended (the Board is the ultimate approver of all policies in the Group) as well as plans of action and budgets. Further discussion points include climate-related KPIs, current and future projects, news, legislation updates, trends, and experiences/best practices regarding various ESG and climate-related issues. In addition to the meetings with the responsible Board member, the Head of ESG & Quality maintains

a continuous dialogue with the Board regarding relevant ESG and climate-related issues. The Board also reviews and provides strategic guidance regarding risk management. Climate-related risks are included in the Group's overall risk analysis.

Management-level oversight

The CEO is the highest management level responsible for ESG and climate-related issues. The CEO is responsible for ensuring that climate-related risks and opportunities are adequately assessed and managed. The Head of ESG & Quality reports directly to the Group's CEO. Lerøy considers this way of working highly effective, taking into consideration the proximity of decision-making and ability to influence decisions regarding climate-related issues.

The ESG & Quality Department manages climate- related issues on a daily basis. The department plays a central role in the management, coordination, and

reporting of climate-related issues. The team dedicated to climate-related issues provides oversight, support, and coordination regarding climate-related matters across the Group, is responsible for reporting on

ESG and climate-related issues both internally and externally. Each company in the Group is responsible for implementing climate-related actions (incl. monitoring and reporting) in their respective areas. Climate-related data is collected from the companies in the Group and is communicated both internally and externally.

Lerøy has defined various ESG-related KPIs and a number of these are audited annually (please, visit our Annual Report 2023 for a complete overview).

Lerøy Seafood Group

TCFD Report 2023

Contents	Sustainability Ambition > TCFD Recommendations >Governance > Strategy > Risk Management > Metrics and Targets > Scenario Analysis	9

Two of the Group's strategic KPIs address the Group's emissions of greenhouse gases (one directly and the other indirectly). The Group's management team reviews climate-related KPIs monthly. Strategic projects intended to reduce greenhouse gas emissions have been initiated to ensure the goals are met. These projects address our most significant emission areas: sustainable fish feed production, sustainable transportation of goods, and alternative fuel sources. The Group management team reviews the progress of strategic projects monthly. If necessary, corrective measures are implemented.

Lerøy Seafood Group

TCFD Report 2023

Contents	Sustainability Ambition > TCFD Recommendations > Governance >Strategy > Risk Management > Metrics and Targets > Scenario Analysis	10

Strategy

The actual and potential impacts of climate related risks and opportunities on the organization's businesses, strategy, and financial planning.

into account marginal differences in our revenue. This approach recognizes the distinctive financial context of our company and ensures a thorough evaluation of the potential consequences. When categorizing the financial

Climate-related risks and opportunities influence LSG's strategic and financial planning and consider short-,medium-, and long-term time horizons, likelihood of impact, as well as financial impact, in the assessments of these risks and opportunities. The following definitions of time horizons and financial impacts are applied:

Time horizon	Year
Short-term	0 - 5
Medium-term	5 - 10
Long-term	10 +

Financial impact	Percentage of revenue
Low impact	< 5%
Medium impact	5%
High Impact	> 5%

Identified climate-related risks and opportunities

In 2020/2021, the Group conducted its first climate scenario analysis using the TCFD framework. The analysis was based on in-depth interviews with the Group's 20 key internal and external stakeholders and identified LSG's main risks and opportunities related to climate

change, in combination with objective climate research correlating to the respective geographical locations. The results of the analysis were discussed with the Group's management team and serve as building blocks for the Group's future climate-related strategy.

During Q2 2023, a new assessment/review of the identified risks was completed to evaluate their impact, using a risks and opportunities matrix (R&O Matrix) where time horizon, likelihood of impact, and financial impact were considered. The new evaluation of risks and opportunities triggered a need to expand our scenario analysis. On the foundation of the new R&O Matrix, six top climate-related risks were selected as the focal point for their own individual scenario analysis. These are the six top climate-related risks: Ability to fill the catch quota; Fish health; Shortages and price development of fish feed raw materials; Fossil fuel regulations; Norwegian Traffic Light System for aquaculture production; Market changes. The scenario analysis can be found in a separate published document (addendum to the main document). A summary of each scenario analysis can be found in the Strategy chapter of this document.

We understand the importance of assessing climate-­ related factors and their potential financial impact. When conducting this assessment, we have carefully taken

impact, we consider the specific circumstances of each of our subsidiaries, including their annual income and revenue composition. For instance, a marginal impact of 5% on the revenue of one of our smaller subsidiaries might be classified as high due to their reliance on core business operations for generating profit. We understand that even a small decrease in revenue can have significant implications for their financial health. They may experience reduced profitability, cash flow constraints, or challenges in meeting financial obligations more severely than our larger subsidiaries. On the other hand, we also recognize that our larger subsidiaries, with their higher annual income and more diversified revenue streams, may have a different impact profile. A 5% reduction in revenue for them might be considered a lower impact due to the presence of alternative income sources, such as different segments, services, or investments. Their financial resilience and ability to absorb such impacts set them apart from our smaller subsidiaries.

By incorporating these marginal differences in revenue, our assessment allows us to tailor strategies and allocate resources effectively, in order to address the identified climate-related impacts. It supports us in enhancing the resilience of our portfolio as a whole and enables informed decisions that align with our objectives.

Lerøy Seafood Group

TCFD Report 2023