How COFCO shoulders climate change challenge in China agriculture industry

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As the changing weather patterns and extreme weather conditions cast a particularly huge impact on food production, how does China, the largest developing country in the world, continuously feed its people that account for nearly 20% of the world total population in an eco-friendly manner?

Let’s start our analysis first by focusing on the impact the climate change may bring to China and its agriculture industry.

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• In terms of status quo, there are more burdens from the “challenge” side than the upsides from the “opportunity” side. Latest statistics show that in 2014, the total population of China hit 1.4 billion, accounting for 19% of the world total population. In order to feed this huge number of population, China has long been under great pressure of pushing for stable, high-efficiency grain crops output. The changing weather conditions bring interference and variability factors into China’s management of this enormous amount of agriculture output, e.g. 607 million tons of grain crops that accounts for 24% of world’s total output in 2014. As a result, for China, there’ll be a much higher cost of failure of dealing with the challenge than that of successfully turn the challenge into an opportunity with advanced technologies.
• State owned enterprises, due to the business model in China agriculture market, shoulder the challenge and social responsibility of climate change management. In order to realize a safe and stable control of such a large number of agriculture output, state owned enterprises play an important role in China’s agriculture value chain. COFCO is the dominant supplier of agri-products, diversified foodstuffs and services in China, integrating agri-trading, logistics, processing, production and sale links, and providing grain and oil products along the value chain. As a result, COFCO becomes the most important business entity that works with China government to face the climate change. Specifically, to be eco-friendly under the changing weather conditions, COFCO needs to pay more attention to save raw materials and water resources, promote resource-recycling technology, develop renewable energy, etc. along its business value chain.

Now that we understand the impact of climate change on COFCO, it is important for us to analyze the steps and methods that COFCO is taking to address these effects.

• As a conglomerate with various business units, COFCO has formed a systematic monitoring system, from group level to each business unit, to carefully track and manage the energy savings and emission reductions. Safety and Environment Department has been established in each of COFCO’s business units with designated responsible for track and report energy saving / emission reduction data monthly to COFCO group management team. At the same time, the Letter of Responsibilities on Safety and Environment signed between the company and each business unit has targets for energy consumption per 10,000 Yuan of increased value and indicators for emission of major pollutants.
• Also, COFCO has been actively investing in research and development of high technologies that help reduce the consumption of raw materials and save water resources. For example, COFCO’s Oils and Fats Division successfully implemented the ‘waterless soap removal’ technology at their oil processing factories, aiming to realize zero wastewater discharge by using this pre-bleaching and compound bleaching technology that does not use water to wash the neutralized oil from the refining plant. A refining plant with a processing capacity of 400 tons/day can reduce wastewater discharge by about 10,000 tons annually, significantly reducing the pressure on water treatment facilities and reducing environmental pollution.
• Last but not least, COFCO actively involves in Chinese Certified Emission Reductions, or CCERS, which is a domestic standard, for producing issuing and trading government-approved carbon credits. COFCO actively encourages its Meat Division and Oil Division, who bear a relatively higher biogas recycle amount, to take part in and proactively implement the CCER transactions. In 2015, the annual approved carbon emission reductions of COFCO Meat amounted to 0.3 million tons, which would also bring considerable economic benefits for COFCO after transaction.

In my opinion, COFCO obviously needs to seek more collaboration both domestically and globally along the road of dealing with weather changes.

• Domestically, COFCO should consider partnering with leading internet companies, like Alibaba Cloud Service, to improve the high quality front-line data gathering and analysis both in its own agriculture monitoring & control system and in professional weather forecast for agriculture.
• Globally, COFCO should launch more partnerships with pioneering agricultural tech firms, like Indigo, to seek opportunities in sharing each other’s technologies on environmental-friendly application to agriculture business.

Source:

1. Annual data report from National Bureaus of Statistics of China
2. World food supply data from Food and Agriculture Organization of the United Nations
3. COFCO 2012, 2013, 2014, 2015 Company Social Responsibility reports
4. “Strategies for Mitigating Climate Change in Agriculture – Background Material”, Andreas Wilkes
5. “The impacts of climate change on water resources and agriculture in China”, S Piao, P Ciais, Y Huang, Z Shen, Nature 2010