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Sustainability

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Climate Change Action Initiative

As an agricultural-based company dependent on the environment, IOI is fully cognizant that climate change is a risk to our business. Our “Climate Change Action ("CCA") Initiative” was therefore introduced in 2020 as one of our long-term action plans to mitigate and reduce greenhouse gas ("GHG") emissions from our diverse operations. Our aim is to achieve carbon neutral as a group by enhancing existing carbon reduction initiatives while actively exploring new opportunities in minimising carbon emissions through operational efficiency and utilisation of renewable energy which is also in-line with IOI’s 5 strategic priorities.

Our GovernanceOur Holistic Approach
The management of CCA Initiative within IOI are embedded within the organisation through; Our approach in implementing the CCA Initiative and IOI’s strategy is developed around the following commitments:
CCA-related key performance index ("KPI") inclusion for the GMD and its top management as reported in the ASR. The KPI inclusion will be applied to the rest of the organisation to ensure a group-wide accountability. To reduce our climate change impact by setting long-term science-based target versus the baseline to provide clear GHG emissions reduction status.
CCA-related strategy, programmes and development to be overseen by IOI’s Group Sustainability Steering Committee. The committee will also actively support and advocate the initiatives under the Climate Change Strategy which will also include climate action risk and opportunity scenarios. To promote climate action plan and practices through innovation, improved efficiency and support actions throughout the operations.
The Group Head of Sustainability and each sustainability units of the business divisions will undertake and oversee the implementation and monitoring of CCA-related performance at the operations level. To increase resilience of our business by managing risks and opportunities, forecasting climate scenarios for climate impact valuation and incorporating circular economy in our operations.

Journey Towards Net Zero

Our philosophy towards No Deforestation and Peatland Management which forms part of our NDPE commitment, is to protect, conserve and rehabilitate as well as manage these ecosystems that support biodiversity and carbon sequestration within our operations.

Our various initiatives over the years have led to reductions in GHG emissions across the Group. IOI’s operational GHG emissions intensity is targeted to reduce by more than 40% in 2025 based on the 2015 baseline. IOI established a five-year emissions reduction target as a short-term benchmark for operating units to pare down the emissions from our operations in alignment with the ultimate long-term objective of achieving net zero.

GHG emissions from the operations are dynamic and the GHG reduction can be highly influenced by the advancement in technology and innovation. IOI will be publishing our Net Zero target in the coming months and the changes will be reflected in the graph below;





Year tCO2e/MT Product % Reduction
2015 (Adjusted Baseline) 2.246
2020 (Adjusted Target) 1.792 -20.20%
* 2020 (Scenario 1 Actual) 1.936 -13.81%
* 2020 (Scenario 2 Actual) 1.665 -25.86%
* 2025 (Scenario 1 Target) 1.310 -41.69%
* 2025 (Scenario 2 Target) 1.152 -48.69%

Footnote: GHG emissions calculation for IOI Plantation is based on RSPO PalmGHG, calculations for refinery are based on ISCC methodology, calculations for oleochemical are based on the Intergovernmental Panel on Climate Change’s (IPCC) and the Institute for Global Environmental Strategies (IGES).

* Explanation for what is Scenario 1 and Scenario 2 can be found in our Sustainability Report 2021, page 32.

Climate Related Risk and Opportunities

The climate-related transition and physical risks analysed are in alignment with the TCFD and are based upon IOI’s specific sourced data as well as data from well-known international climate organisations and other relevant third-parties.

Our Transition Risk

Type of Transition Risk Risks Opportunities
Policy and legal
  • Financial repercussions from GHG emissions due to higher compliance costs such as carbon pricing.
  • Additional costs associated to taxes imposed on fossil fuels, etc.
  • A low carbon operation will significantly reduce operational cost from increasing carbon price and less dependence on non-renewable fuels enabling IOI to be more competitive where operational cost is concerned
Technology
  • Innovation replacing products produced in an unsustainable way.
  • Increasing costs associated with old systems that are energy inefficient.
  • Innovation in technology and circular economy solutions to bring about efficiency in energy usage and resilience in the use of natural resources.
Market
  • Risk for a company as buyers and consumers have expectation for low carbon products.
  • If a company does not have clear climate change strategy and targets.
  • Competitive edge from early adoption to low carbon emissions operation.
  • Ability to access markets that have strict carbon emissions regulation.
Reputation
  • Reputation at stake due to greater focus by stakeholders on the Company’s management of climate-related risks
  • Improved company's environmental scoring and reputation.
  • Brand recognition as a climate friendly company

Our Physical Risk



Footnote: Physical risks resulting from climate change to the operating units were quantitatively assessed by using climate modelling datasets and relevant hazard models based on different severity of climate change scenarios until 2050.

Type of Physical Risk Risks Opportunities
Acute
  • IOI facilities and landholdings are located at areas that have low or stable acute risks so that operational disruption due to extreme weather event is low
  • Exploration in technology and innovation to prevent facility inundation, diversification of products and climate resistant materials.
Chronic
  • A number of facilities and landholdings are expected to be exposed to heatwave and water stress.
  • Few of the facilities and landholdings that are located close to the coast are expected to have risk of sea level rise.
  • To explore alternative water source and water retention facilities which will increase operational resilience as well as reduce operational costs in long run.
  • Mitigation plan to address the risk of sea level rising can be put in place.

Our Mitigation and Adaptation

While climate change present significant risk to all the companies at different magnitude, they also create significant opportunity and competitive advantage for companies that are able to recognise those as part of the risks and subsequently explore mitigation and adaptation solutions. Below are the mitigation and adaptation solutions for the identified transition and physical risks in IOI operations:

Category of Climate Related RiskType of Risk ExposureMitigation SolutionsAdaptation Solutions
Transition Risk Carbon pricing
  • Reducing operational GHG emissions through new initiatives and technology.
  • Initiate projects that contribute to carbon sequestration such as vegetation rehabilitation and conservation.
  • Maximising carbon sequestration from oil palms by increasing palm stands and yield per area.
Physical Risk Heatwave
  • Proper building and facility heat insulation.
  • No planting on peat and ensure best management practices to existing planting on peat. Near real-time monitoring of fire prone areas.
  • To reduce dependency on air conditions by installing air ventilation system in the building.
  • Utilise natural heat by installing thermal harvesting system.
Water stress
  • Reuse of reject reverse osmosis water.
  • Rain water harvesting and retention.
  • Recycling and utilisation of treated effluent and waste water.
  • Development of water stress resistant oil palm variety.
  • Initiatives to reduce water consumption.
Sea level rising
  • Identify and enlarge existing drainage for better water flow.
  • Relocation of sensitive machinery or electrical instrument to higher level floor.
  • Increase height of machinery foundation, equipment footing, pump plinth, base frame of motor.
  • Maintenance of drainage cleanliness to ensure no dirt and foreign material accumulated in the drainage system.

Please Click Here for full Sustainability Report.