Hear Dag Mo now.
I can.
Hello, everyone. Hey, can you hear us?
Yes.
Yeah. Excellent. We have some more people signed up than have joined, so let's just give another minute before we start, I think, to see if they will join. Okay, I suggest that we just then start, actually. I'll just start by welcoming everyone to this meeting and thank you for joining us on our first group ESG engagement call. We do appreciate that so many of you could join this preset date. For those of you that don't know me, I am Maria Gabrielsen, I'm the Head of IR, but I'm joined here today with Magnus Ankarstrand, our CFO, and Bernard Stormyr, VP Sustainability Governance. We've asked you all to submit questions in advance, and we've grouped all these questions into these topics that you see listed on the agenda here.
I'm happy to say that all questions that have been submitted should be discussed during this meeting and addressed. Hopefully that will be a good thing. Just to also mention that we will have a bit of time for Q&A at the end, just to see if there are any follow-up or further clarity needed to the comments we've given. Should you then want to speak, either if you have a follow-up question on the topic itself, just raise your hand and we will give you the word when that is appropriate. Just so you also know, this meeting, and that includes the Q&A session, will be recorded for the purpose of creating a transcript. By remaining in the meeting, you're now providing your consent to being recorded.
I think that's what I wanted to start with, and then I think we can just actually start the presentation. This is the first topic that we have, three questions grouped into what we call Decarbonization Strategy, Outlook, and Challenge, and I will give the word to Magnus to address these questions.
Yeah, yeah. No, I'll start off with the one on timing of use premiums, incentives, etc., on the ammonia part. By the way, we're happy to be here, and thanks to all of you for joining. That is, of course, a very relevant topic, as you probably know, for our production system and how it works. I mean, predominantly sort of encompasses scope one and scope two emissions. In our production system, it is really the ammonia production that carries the most CO2 emissions, most energy-consuming, most CO2 emissions. The ammonia production that's touched upon in this question is very important. We are also a big importer of ammonia, so from a scope three upstream position, then of course the same question is valid.
As you probably know, we have done quite a lot on the ammonia side already, some under planning and some under execution and some things completed. There is a little bit of what we have done concretely on the ammonia side, on the decarbonization of ammonia. We have built a green pilot plant, 24 megawatts in Porsgrunn, a green hydrogen plant feeding into our ammonia plant there, producing between, yeah, around 25,000 tons of green ammonia. Fertilizer equivalent of that is between 40,000 and 70,000 tons, depending on product. We have also taken the investment decision, and we are currently constructing a carbon capture project in Sluiskil, where the CO2 will be sent to the Northern Lights project in Norway for permanent sequestration. Those are, I mean, those are, and that will complete in 2026.
On top of that, we are executing and have executed a range of smaller projects for energy efficiency in our ammonia plant that also has a CO2 reduction result. Of course, one big element is looking into new production capacity that would, particularly with CCS, be a major step change shift in terms of decarbonizing our ammonia portfolio and also then production portfolio. To the question how sort of the changes lately impacted that, I think for a major project or major projects like that, there are a range of factors that sort of lead to whether or not such a project looks to be possible and the ultimate investment decision. I think the biggest core strength that we have in that field is the fact that we have our own captive offtake. I mean, that's important to make such a project work.
You need to have somebody to take that ammonia, take those molecules, right? That's a problem for a lot of projects because as we see sort of the external demand for ammonia for shipping fuel or energy production and so on, it's coming later than maybe not what we thought, but what the market has been thinking. That's a struggle for a lot of different projects, but that in itself is not a struggle for us because we, I mean, we consume that ammonia, gray ammonia today, and we can replace gray ammonia with that new ammonia. Of course, another important element for these projects to be successful is government, what I call, I mean, government frame conditions, right? That's not only subsidies, but it's that too.
I mean, the reason why North America has been looking to be a very attractive location for blue ammonia in particular is both that they have a fairly well-advanced carbon capture industry, but also because they have a tax incentive for carbon capture and sequestration, which is important. It is a common misunderstanding that that is something that was created with the Inflation Reduction Act. Actually, it predates the IRA. It was implemented by the Obama administration. Actually, in its first form, it was implemented by the Bush administration, second Bush. The number or the size of the tax credit was increased from $50 to $85 during the Biden administration. Of course, it is a question mark whether that survives or not with the changes that now are going on. I think so far, so good in a way.
First of all, because it's an established incentive, but also because the support for this is fairly strong across the aisle between Republicans and Democrats. I think there's not many who sort of oppose the 45Q tax credit by its merits. Of course, in the current budget, or I mean, the current environment in the U.S., where it's a bit hard maybe to see what the plan is, but of course, they are looking to how to balance the budget essentially, but also pay for significant tax cuts in other areas. There has been a fear that irrespective of the merits of the tax credit itself, that this could be sacrificed simply to fund something else, right? We're paying close attention to that.
As it happens or stands right now, the Ways and Means Committee and the House of Representatives made their proposal a week ago or so. That includes 45Q with some small modifications, but nothing material for what we're looking at. That proposal was rejected in the first vote in the Ways and Means, but this is a thousand-page tax bill. I mean, 45Q is just a minor part of it. I think it was rejected for completely different reasons. What I hear, and I have not been able to confirm it, is that it later passed the committee, and it actually passed the House of Representatives today. I need to confirm that. From that perspective, the tax credits for carbon capture in the U.S. has passed or reconfirmed, or how to put it, the first hurdle.
The next hurdle for the budget, which is a part of, I won't even say what the bill is called because it's a bit of an old name, now has to pass the Senate, where at least as it pertains to 45Q, we've seen that there is strong support both in Republican and the Democrat side for 45Q. Now, there's a lot of disagreement in a lot of the other elements there, and this will have to go to reconciliation, which means a 50% majority in the Senate. We do feel, short answer is that we are quite hopeful that this will remain, and of course, then remain a strong incentive for decarbonizing ammonia production as such. Maybe just elaborate a little bit further. Another important element of the viability of such a case is also Europe, right, which is a key market for this product.
Of course, a key driver for that is ETS, which has been stable or existing for a long time, but also the carbon border adjustment mechanism. Same there from a regulatory political perspective. I mean, that's been reconfirmed, some changes on the implementation side, but still no. There is a lot of resistance, right, in many different areas, for many forces in Europe too. So far, the European Union has reconfirmed CBAM. It remains a risk in our view. Obviously, it's politically established, and anything that politicians establish, they can also take away. Although we deem the likelihood of CBAM going away as very, very low, it's not zero. We are monitoring that.
All in all, when it comes to what we're looking at, and particularly the blue ammonia project and so on, I would say we are still positive on the regulatory side of that. That in itself has not then enticed any changes to our approach and strategy in that area. That is the good news. I think when it comes to a lot of the other incentives, so to say, I think the Hydrogen Bank, the Fuel EU Maritime, the IMO regulation, but also 45V, which is a bit of a separate story in the US there, I would say the picture is more unclear.
To simplify a bit, we, in our business case thinking around the decarbonization of our ammonia production, have never put so much emphasis on those incentives or those elements simply because of the uncertainty surrounding them, including RED III and RFNBO and so on. In a way, I think it's fair to say that our assessment is a little bit independent of that. Of course, we look at it, and it's still important, but it's not, I would say, it's not the most important factors for our decarbonization strategy. I think, yeah. I think I'll leave it with that on the regulatory side. I don't know, Maria, should we open up further questions now, or should I maybe take the two next one?
We could maybe take the two next one, and then we can take questions to the whole point.
Yeah. Yeah, I'll do the last one first. Can we provide a disaggregated breakdown of CapEx between key decarbonization projects and to the extent to which tax credits are important? I think the tax credit part I just explained. When it comes to the disaggregated, I mean, breakdown of CapEx, the answer to that is no. We don't report on CapEx spend typically on projects before they take FID and before they sort of become firmer in our plans. Also because we have flexibility in this area, right, in terms of which routes we choose. Also given the scale we have, the big buyer we are of ammonia, I mean, there are different ways that we can organize ourselves around this. Of course, it's important for us to decarbonize in a profitable manner.
From that perspective, we operate a portfolio and try to execute that portfolio to the best both to reach our targets, but also to our shareholders' requirements on the profitability side. If we do not go out with detailed plans for that because they change, we would only confuse the market if we did so. Of course, as a listed company, we have restrictions on how much CapEx we can use. We have anything from rating thresholds to debt ratios and all these kind of things. That is something that also restricts us, right? We have to manage all these elements. I will say that we are positive towards reaching our 2025 targets. We also make plans towards the 2030 targets. We feel we have a plan where we also, from a CapEx side, will be able to achieve that.
But we're not providing any more details on that. Any questions? I guess we can open for that now. If not, no?
Any questions for this section before we move to the next one?
Yeah. Hi, Maria. Quick question from myself. This is Lily Stuart at Northern Trust Asset Management. Nice to see some of you again. I think I've met quite a few of the team before in a previous role. I'm quite new to the end-term team. I wanted to maybe circle back. You mentioned your pilot plant earlier. That's very interesting and quite exciting. Could you talk more about the decision tree in terms of what sort of, what are the economics you need to reach to sort of scale that pilot project, or what are the timelines, or what are you hoping to find out from that project?
Yeah. No, I mean, it's been a very useful project for us to, I mean, both from a market perspective, but mostly from a technical perspective, to look at green hydrogen production, how to build it, how to integrate it, how to operate it. I mean, interestingly, we operated green hydrogen production from 1949 to 1993, right? That's how we produced ammonia to begin with. Unfortunately, or I mean, in those days, the electricity was also almost free, right? Things have changed a bit since then. There is no hiding that, I mean, it's public information that this is a project that was heavily subsidized on the CapEx side by the Norwegian government.
It was also made possible by agreements with fertilizer buyers such as Lantmännen, who have operated an integrated value chain on the Ag side, who is willing to pay a premium for that and make a project like this viable. I think what we see is that, I mean, green ammonia or green hydrogen or hydrogen-based and electrolyzer production is more technically challenging than what we have thought. It is safety requirements, quality requirements are quite different today than what it was 75 years ago, luckily. That and sort of the scalability, it's a heavy lift to scale it up. Those are sort of key decisions. Of course, we really want to now get some experience through the operations to see how these electrolyzers degrade, what kind of operational challenges we'll see, and so on.
When it comes to the site at large, we have the scale-up depends on a few things, right? Also what kind of government incentives exist to do that. That's not only subsidies. That's also, for instance, requirements for the Norwegian shipping industry to use green ammonia and these kind of things. So far, of course, on the regulatory side, there's not much in place that sort of creates a market for these products beyond ETS, but ETS is not enough to drive that market. Also we have other alternatives for the site. I mean, carbon capture, we already do to some extent today, even though for now it's sold as for industrial gas purposes. We are looking at different options for the site. Any other questions?
I think you actually touched upon this in your answers to the two other questions, but I think we haven't addressed the second one on what the barriers to entry on more environmental-friendly products, although you have commented a bit on policy schemes and bringing in place to create demand, basically.
Yeah. No, I mean, the barriers to entry, I think, I mean, urea, just disregarding the carbon intensity of urea, I mean, urea has the advantages that it is high nitrogen content per ton. So you get to ship a lot of nitrogen per ton you ship. It's a stable product chemically and so on, right? Nitrates in comparison has a lower nitrogen content, but also the agronomic benefits are larger. More importantly, in this context, is that it's a product that can be decarbonized. Going forward, the biggest disadvantage for urea in Europe versus nitrates or decarbonized nitrates will, of course, be that urea will have to pay either ETS or carbon border adjustment mechanism provided that stays in place. Everything else equal, that would create a premium for a decarbonized product.
Okay. If no further questions to this part, I'll go to the next slide. It is not too late to raise questions later. This section is about the timing. It is a prolongment of the last one, right? The timing and outlook for when we will gradually increase to more and more low carbon products.
Yes. I mean, what we can say on this one is that we are working actively with food chain companies such as PepsiCo and so on to create this demand, right? Because there are little incentives for the farmer to do this, understandably, right? I mean, they are squeezed between the cost of inputs and the cost of crop prices. As long as there is no sort of carbon incentive or, I mean, element in their economics, there is no way they can pay for this, right? I mean, it is really the food industry that needs to step up here and say that we need, we want to decarbonize our upstream scope three. We are willing to pay for that. Hopefully also the market, the end consumer will be willing to pay for that.
Of course, once you distribute the carbon cost over a longer value chain, that cost is diluted and becomes less material, right? As opposed to if the farmer had to pick up the whole bill, it would be very, very difficult. We see good traction there, but it is still early days. Even though the commitment from a lot of companies is very strong, there are a lot of things that need to be developed, both, I mean, logistically, but also in terms of certification, how these rules will, how do you sort of account for this? How do you make sure there is no greenwashing? You do not sell the same decarbonized ton twice and so on. In a way, of course, the split of our gray fertilizer portfolio and our green/blue fertilizer portfolio will, of course, depend entirely on what type of ammonia we use.
That's sort of linked to those projects. That ties into our, I would say, the best sort of measure there are the targets that we've set ourselves for 2025 and 2030 on the upstream side. Whether there will be a market for all, whether that's a bit simplified, sort of food companies will pay for the certificate of that, that remains to be seen. We strongly feel they will, but how much, of course, remains to be seen how that market develops. We're not going to issue the certificate without getting a premium for it. Of course, the decarbonization will happen anyway. For the planet, it's a good thing no matter what. It is important, not just for us to get paid, but for this to establish as a market.
There is actually a real incentive to decarbonize so that it scales on its own, right? Because decarbonization is not going to scale up solely on government CapEx funding. That's not going to work. There needs to be a working market for it. That's kind of our view. When it comes to the second question, does the company have a strategy to expand the production and sale of high nutrient use efficiency products, including organo-mineral and organic fertilizers? I would say on the first part of that, high nutrient use efficiency products, the answer is absolutely yes. That's been our strategy for many years. I think what we're doing now is also to advance sort of the advisory part and inform and create demand based on how can the farmer use these products so that they also become high nutrient efficiency, right?
Because that's, I mean, nutrient content is nutrient content. You can read on the label of the bag how many nutrients there are of N, P, and K in a kilo of fertilizer. That does not really change so much with the type of fertilizer. What does, a bit simplified, what is different, right, is that nitrates, as an example, can be taken up faster by the plant than urea as an example on the nitrogen side, which means that everything else equal, nutrient use efficiency is higher, right? I mean, the faster it goes up in the plant, the less goes out in the rivers and in the lakes and so on. It is important to remember that when it comes to nutrient and plant growth, it is mass balance, right?
I mean, it is the amount of N, P, and K plus water that is taken up into the plant, out of the ground into the plant that creates the mass of sort of corn or wheat or whatever the crop is. It is really the number of nutrients taken into the plant. That is pure mathematics, right? I think the efficiency part really comes from the fact that if it is not efficiently taken up into the plant, eventually it will be washed out. Not all of it, but it can be washed out of the soil, right? That is really the nutrient use efficiency, how much you put on the ground and how much goes into the plant, which is the key thing. That also depends very much on how you apply it, right?
If you apply it in the wrong way, if you use nitrates in the wrong conditions, in the wrong way, you can have either a good or a bad nutrient use efficiency based on the range of factors. That is a key part of our offering. Where knowledge levels in some parts of the world is fairly high, other parts of the world almost non-existing. That is really a critical part of what we do. We have included organo-mineral fertilizer in our portfolio to some extent. I think it is important to highlight that organic fertilizer is not necessarily more efficient. I mean, quite the contrary, actually, right? I think if you take manure as one example, it is extremely inefficient from a nutrient use efficiency perspective.
Most of it, or a lot of it, will simply just run into the river and into the lakes simply because it is not plant-ready, right? Which is the big difference between our produced fertilizer that are designed, particularly the nitrates, to be taken up faster by the plant. What we are doing is to try to combine the knowledge of the two and say, okay, with the acquisitions that we have done in that space, how can you sort of combine organic material into high nutrient use efficiency fertilizer so you get sort of the best of both worlds?
Bernard, do you have any comments you want to add on this section?
I think Magnus practically covered everything that I would have to say. Maybe add just one perspective, and that is on what to expect from Yara's future climate transition plan. Any specific split between one or the other technology is unlikely to come. We will remain technology neutral in how we approach the decarbonization plan. As Magnus explained, we also have optionality. Deciding now what technology will be invested in in 2034 is not really possible. We will continue explaining the decarbonization levers we have available and how we intend to work on those. Also in accordance with the CSRD, ESRS climate KPIs will continue to be developed on a five-year increment as prescribed. That will also come in the years to come.
Thank you, Bernard. Any questions from the audience before we move to the next part? Max, please go ahead.
Hi, just a follow-up question. I'm Max Boucher from the FAIRR Initiative. We're an investor network focusing on sustainability in the broader food and agricultural sector. We work with many of the investors who are here on the call. My follow-up question is a little bit broad, but you spoke quite nicely of the positive impact of ETS and CBAM on nitrates, fertilizers as opposed to urea. At the same time, you have a lot of regulation, I guess, at least in Europe, or at least a lot of ambition to increase nutrient use efficiency from a water quality perspective. A lot of discussions around actually improving the use of manure and so on. It sounds to me like we're at a time where the policy stars are aligning quite nicely for these kind of better products, which in theory seems like an interesting proposition to Yara.
Do you think this time is the time for the industry, which has a history of kind of being excluded a little bit from these because of the high emphasis on food security in Europe?
Yeah, that's a very good question. I do think the answer is yes. I think the reason why is really that when it comes to the fertilizer industry, it is possible, right? I think that's the, I mean, technologically, I mean, it's not easy, but it is possible, right? The technology exists to a very large extent and is particularly carbon capture and sequestration, right? Because it can be done at scale. I think, and we have 30 years' experience of doing it. I think that's the positive side. It's something that you can do and still the value chain can remain sustainable, right? That's the positive part. As opposed to some other hard-to-abate industries where the technology uncertainty is still high and the cost of doing it is high.
It's not necessarily clear whether the value chain can actually sustain this increase in cost, right? Or is it even technically possible in some cases? I think from that perspective, yes, provided that, of course, the politicians stick to their guns on CBAM, right? If they do not, which again, I think we see as an unlikely scenario, but if they do not, I mean, two things could happen. You do not get CBAM and you get ETS. What would happen? European industry would be completely outcompeted and you would have cheap imports of gray urea from North Africa and the Middle East and China and everywhere, right? I just do not think that is a scenario that could prevail for obvious reasons.
The other one would, of course, be to take away ETS as well, but then you're pretty much giving up the whole climate change agenda in Europe, which I think is, so we're sort of moving into highly unlikely territory, I think. It's not so easy to circumvent CBAM on fertilizers either. I know in the aluminum industry, for instance, they're worried about circumvention with scrap metal or that the aluminum is just used to being upgraded into whatever it's turned into somewhere else and then imported to Europe. You can't technically, of course, you could do that on ag products. I mean, you could fertilize them somewhere else and grow them somewhere else and then import it to Europe. I mean, you would take away food security and European agriculture production.
I think that's also, in a way, not a very palatable scenario for Europe. I think you're right. I think this is the time that this will happen.
Thank you. Appreciate the answer and appreciate the positive angle on this.
Okay. Let's move to the next slide, which is more, okay, sorry, another question. Raj, go ahead.
Hi. Raj Singh from Phoenix Group. Just a quick one and apologies if this is a very simple, basic question, but you've discussed the demand drivers and need for incentives for customers. In terms of the premium that you've mentioned, premiums for sort of the low-carbon fertilizers and renewable-linked fertilizers, within the wider portfolio, what do these premiums look like? What are we talking about in terms of how they compare?
I think the easiest answer is that we believe that there needs to be a premium equal to ETS, right, or equal to CBAM. Essentially, if you come at the border or at the plant gate and say, "I have this product that's been decarbonized, so it's now almost," or there's a differential, right, in how much you would have to pay in carbon costs for that product versus one that's being produced with normal gray methods, right? The difference there is basically the premium, right? The market drivers would drive themselves, right? Okay, if a ton of ammonia needs to cost X because nobody's going to produce it unless you get your cost covered, including ETS, then the company who doesn't have to pay ETS because they decarbonize their product will get that. You'll get the same price as the gray ton, right?
You do not have to pay the same cost. That is really the premium we are sort of thinking of in that respect. The other premium would be, consumers simply want to have green coffee or green almonds or decarbonized coffee and so on, right? That is more a marketing question, how much are you willing to pay for that? That is sort of my point that once if you say, let us just say that is $2 for a cup of coffee, right? Or $1 for a cup of coffee, or actually it would be even less, 30 cents or something like that for a cup of coffee. Okay.
Once you sort of push that back in the value chain, what are you talking about when you translate that into ammonia that went into producing that coffee bean, to put it this way, which is just one portion of the whole cost in that supply chain? Then that 30 cent becomes a much, much bigger number that could pay for the extra cost of doing it. It varies, as you can probably figure out from my answer, it varies a lot between which end market and where this goes and so on. Also, the premium that is required differs, right, b ased on which production technology it is, right? That is where we see, sort of a bit on the ammonia side, the different competitiveness of green versus blue, right?
You can get now 95-96% decarbonized ammonia at a much, much lower cost than what you could green ammonia, which means that the cost per ton of CO2 for that incremental decarbonization from blue to green becomes a very, very, very high number, right? That, again, that's in a we don't know yet, right? It also depends a bit on how these technologies develop. We think over time, green will become, I mean, or electrolysis will become a lot cheaper. It also depends a lot on electricity prices and all these things.
Thanks. Would the premium be offset potentially by export rebates within CBAM, and if that's going to be updated this year? Is this something that you're expecting an update on?
It is at least something that's required for a level playing field, right? Because, I mean, it is the case partly for our industry, but also for other industries that you import raw materials to Europe, you manufacture goods, and then you export those into other markets. Of course, for the European market in isolation, it's okay, right? Okay, you have ETS, you have CBAM, it's the same for everybody. It kind of has to lift the price in the market to pay for that. If you sell into a country that doesn't have those, there's no automatic willingness to pay, right? Unless you're a marginal producer, nobody's going to pay you for that. That we believe is required to have a level playing field.
Thanks for the answers.
Okay. We will go to the next section about the impact on climate and nature from the downstream use of fertilizers. I think Bernard will start answering this one.
Yeah. Yeah. Starting with the climate risks, we do know that the most significant greenhouse gas emissions associated with Yara come from nitrous oxide emissions from farmers' fields when our products are being used. These emissions stem from microbial processes in the soil, meaning that they are inherently hard to do anything about. If you review IPCC publications or the latest sectoral decarbonization approach publication from SBTi on the chemical industry, you will find that it is expected that the majority of these emissions will still remain in 2050, also in a one and a half degree scenario. There are two main ways of mitigating the climate risk from use of products. One is to increase the efficiency when you use the product, meaning that you need less of it for every ton of grain or other crop produced.
We do have precision farming tools commercially available in the market already today to support this. The other way of reducing those emissions is to manipulate the microbial processes in the soil. This can be done by adding so-called inhibitors to the fertilizer product. We do know that they have a positive effect on the greenhouse gas emissions. At the same time, society is somehow a bit sensitive to add additional chemicals to the food supply chain. Research is ongoing into inhibitors. They are considered to be safe from a human health perspective. The impact they have on the microbial process in the soil is temporary. They are not of a permanent character.
We are collaborating with the rest of the industry through the International Fertilizer Association to do more research on how such inhibitors can have an impact on the emission factor associated with the use of product salt. I should just emphasize that even with inhibitors, it does seem that there's a significant residual emission remaining in place that will still be there also in 2050, according to the knowledge we have today. Considering then the nature or biodiversity or water quality risks, this is a topic that we are where we are tracking the science carefully. We do know that there are areas which are sensitive to nutrient runoff and leakage from farmers' fields. Science can now tell us in quite a specific geospatial grid on where nature is more sensitive and where it is less sensitive.
It is, however, not obvious what we as an input provider can use this science for. The main answer from the product offering that we have is any way to support the farmers in using the products as an efficient way as possible, meaning that as little nutrients as possible will be lost to the environment. In our field trials, we normally achieve more than 80% nitrogen use efficiency from the fertilizer applied as compared to a typical figure of 60-something % in the EU. Globally, that figure is even a bit lower than what is typical in the EU. We have signaled support both to the target in the Global Biodiversity Framework and in the Farm to Fork publication from the EU of having a political target of halving the nutrient losses to the environment.
From our field trials and use of our products and technology, we see that that result can be achieved without loss of yields. I think it is also important to keep back of mind that there is a biodiversity and nature risk for water quality. We also know that the agricultural sector is one of the, well, it is the largest driver of loss of natural habitats on land. It is also important to maintain the productivity on agricultural land so that we reduce the economic drivers for land use change and further natural habitat destruction. For that purpose, the use of fertilizer is also important. On the last question, the exercise we went through was, it was a bit more on the academic side.
It used multiple lenses to look at life cycle analysis for different types of products, looking at water consumption, risk of water pollution, any pollutants in products, comparing organic-based products with mineral-based products. It gave us important lessons learned on how to do life cycle analysis from multiple perspectives, but it was not pointing to specific operational implementation. The answer to how to reduce pollution and biodiversity loss remains to have effective products and precision farming technology to support the farmers.
Excellent. Thank you. Any questions to this part? Yeah, Max?
Just another follow-up question. Thank you for this detail, Bernard. Appreciate it. It seems to me that you have the solutions, as you said, in the sense that you can provide products that have 90% nutrient use efficiency, which would resolve a lot of these problems. The barriers to adoption, when we think of farmers, I guess, not being quick enough to adopt these things, is it somewhat related to maybe the slower than anticipated growth that Yara had for a while in its segment, which I think of digital solutions and farmer support and engagement, I guess, from more of a precision ag and expertise level? Are these two problems somewhat related?
I will simplify it a bit further. I would say that the core issue is probably that the farmers are not really incentivized to improve their environmental profile. There are regulations, there's a lot of paperwork for the farmers, but when they deliver their products, there's no segregation or differentiation based on environmental performance. I think the types of collaborations that we have with PepsiCo, Lantmännen, and others is a starting point for how to improve on this. Another one is to have potential regulatory requirements to use precision farming technology. I think we need to see an enabling environment around farmers to support them in driving progress on this area.
Thank you. And the initiative with PepsiCo, is it under the regent of our culture program or is that a separate program?
It's connected. So it's both about the climate dimension. We are discussing soil health. We are discussing nutrient use efficiency, which is an important indicator under the regenerative ag framework.
Thank you. That's all from me.
Yeah, Cordelia, go ahead.
Hi, good afternoon. No, thank you for this update on biodiversity. I think we've engaged with Yara in the past on water, so receiving these updates is really great to hear. Just in terms of I was reading in the report that in 2024, you were sort of evaluating nature impacts at production assets and then looking to understand nature impacts at the raw material extraction and then particularly defining baseline initiatives for farm-level impacts. Just on that last point on the farm-level impacts, just interesting to hear if you've got an update on how that work's been progressing. Also, I guess, to your last point as well on farmer engagement, what kind of pieces of legislation particularly would be important and whether there can be sort of some cross-pay group collaboration to drive change on them?
Yeah. On the baseline, the work that we have done so far is focused on our own production sites where we have used both globally well-accepted tools to map natural habitats and the state of biodiversity in the nearby areas where we operate. We have also collected similar information from a local perspective in context of local regulations. What we find is that the bottom-up and top-down approach does not give us consistent information. We will be continuing to work on the baselining when it comes to our own production assets to clarify which is really the right approach or is there a way of combining the internationally well-accepted tools with the bottom-up approach. When it comes to baselining at a farm level, the inherent challenge is that we do not typically have any access to primary data at the farm level.
I think the type of collaboration that we do in the value chain is an important example of how we can gain a better understanding of what it takes to change farm performance, also built on primary data from the farm. Data access from the agricultural sector is a significant threshold for doing proper baselining for what happens on the farm.
Okay. I think I'll move us to the next slide, which is an update on the SDA process from Bernard.
Yeah. I guess this is also a topic that we are eager to see answers to. The short answer is really that there is nothing more to add now compared to what was in the 2024 integrated report when it was published. We remain part of the expert advisory group, which is not very active at this point in time. The SBTi is consolidating all input from pilot testing and public consultation of the SDA. They had announced that the final SDA would be published Q2 in 2025. I think I have said this several times also in the past that they have always been delayed when compared to the announced deadlines they put there.
With regards to the previously submitted targets, what we agreed with the SBTi was to put the validation process on hold while we were waiting for the SDA to clarify some of those more technically oriented questions on how to allocate the CO2 found in the urea molecules. We have also had quite a few discussions on how to understand the scope three category 11 emissions and what mitigation efforts are expected from the SBTi on that end. Those are our questions that we are still waiting to see the final SDA being published, after which we will make our assessment of the publication and then see which steps we can take afterwards.
Excellent. Any questions on that? I think we're moving to one of the final questions here, then, but just a quick question on sustainability targets in share-based remuneration.
Yeah. [crosstalk] Will you take that one? Yes.
I mean, a general comment is that the, I mean, the way the share-based remuneration works in the company is that that's allocated by the board of directors, and it's at the board's discretion. I mean, there's an upper limit, and then there is sort of, I mean, different limits for different levels and so on. All in all, that's done by a holistic review, taking multiple KPIs into account.
Yeah. Of course, overall, the aim is to drive long-term value creation aligned with the company's strategy, and that is linked, of course, to the strategy scorecard across people, planet, and profit dimensions. At the end, as Magnus says, it's at the discretion of the board of directors.
Final question is on Yara's lobbying activities, Bernard, just a quick comment from you on that one.
Yeah. So we did a mapping, which was finalized three years ago to map all memberships and to test whether or not the organizations where we are members support the goals of the Paris Agreement. During that process, we did not find any red flags. I do know that there's an interest to see a published list, including our assessment of the various memberships. Currently, that 2022 process is a bit too old to be used for a new disclosure. What has happened in the interim period is that we have the CSRD, ESRS being the main focus for developing the company disclosures, and we will continue prioritizing to remain compliant with CSRD, ESRS. The disclosures on lobbying activities will be developed alongside CSRD, ESRS requirements.
Excellent. Thank you, Bernard. That means that we've actually gone through all of the questions that we got submitted to in advance. I would just like to ask if there's any final comments or questions you would like to ask now before we end the call. Yeah, Max?
I would have a question on CSRD and ESRS, which we are on our end also kind of coming to grips with. I was wondering, as a company that had quite strong disclosure prior to that regulation being implemented, if you have seen your disclosures go backwards a little bit versus what is now mandated, whether it has now gone a little bit backwards from what is mandated versus what you had previously and how you are taking that forward.
It's quite an interesting discussion. I think it's a good thing that the sustainability statements are standardized. Implementing the standards has been really hard work. I do not think that the quality of the readability on the report has improved. I don't see that. I think over time, having standards is something that should make it more feasible to do comparisons across companies, and I think that will bring value. I do think that all of us working on CSRD, ESRS, we have maturing to do to get a better grip on how to deliver on that.
Do you see a good alignment with, for example, the TNFD, which I'm sure you are starting to look at as well, or do you think the TNFD goes a little bit beyond the CSRD?
I see a reasonable level of alignment there, so I do not see any real conflict. To the extent there are nuances in between the two, for now, CSRD, ESRS will be the priority.
Thank you. If that's helpful, we hear very similar comments from other companies across sectors that operate in the Nordics and had strong disclosure prior to CSRD. It is not only you.
That's good to hear. Okay. That means that we've covered everything we were planning to go through. I really appreciated that you all sent questions in advance like we asked. Since this is the first time we've done this group call, we're also happy to take feedback after the meeting if you have some specific feedback to give us on how this worked. The plan is to set up a second group and get a group call then during the autumn, basically, as a next option. We'd just like to say thank you for everyone for joining and wishing you all a great day.
Thank you.
Thank you.
Thank you very much.
Bye.
Thank you.