Our Fundamental Approach to Climate Change
The Group recognizes climate change as one of the critical issues common throughout the world. In 2022, we declared our support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
In line with the TCFD recommendations, we have identified our climate change-related risks and opportunities, analyzed and evaluated their financial impact, and deliberated on possible measures to implement, taking resilience into consideration.
We will continue to evaluate and manage climate change-related risks and opportunities, disclosing information appropriately and working to realize carbon-free societies.
Governance
Sustainability Committee
In May 2022, the Group established a Sustainability Committee composed of Executive Officers and chaired by the CEO. The Committee discusses and deliberates important climate change-related matters among other issues, decides on initiative policies, and monitors the status of related activities. The contents of the Sustainability Committee's activities are reported to the Board of Directors, which supervises the Committee.
Going forward, upon formulating business strategies and making investment, loan and other decisions, we will conduct comprehensive deliberations, taking into consideration our environmental policy and important climate change-related matters, and strengthen our climate change-related governance.
Chief Sustainability Officer (CSO)
In August 2022, we appointed a Chief Sustainability Officer (CSO) with the aim of enhancing our sustainability-related measures, initiatives, and internal and external communications. The CSO is responsible for promoting sustainability within the Group and takes the initiative in formulating related policies, establishing systems, making proposals and managing progress of related initiatives, and more.
Strategy
The Group strives to anticipate risks related to the growing severity of natural disasters caused by climate change and changes to the environment, and to identify the impact they will have on business. Regarding the impact climate change will have on the Group, we have forecasted and analyzed changes in the external environment in accordance with the framework recommended by the TCFD.
Risks and Opportunities
Climate change risks can be divided into two categories: physical risks and transition risks. Physical risks are risks of harm to people or property due to extreme weather such as large typhoons, droughts, and heat waves. Transition risks are risks of being left behind due to failure to adapt to changes accompanying policy changes by national governments aiming for transition to carbon-free societies as well as rapid technological innovation. However, appropriately responding to these risks is recognized as contributing to greater competitiveness and the creation of new business opportunities.
Identified Risks and Opportunities
| Business Impact | Degree of Impact | |||||
|---|---|---|---|---|---|---|
| Risks | Opportunities | Short-Term 2030 | Long-Term 2050 | |||
| Transition Risks | Government Policies and Regulations | Introduction of Carbon Taxes, Energy-Saving Regulations, Emissions Regulations | Increase in costs related to GHG emissions from business activities due to application of carbon taxes. Increased risk of regulatory violations due to failing to comply with energy-saving and emissions regulations in a timely manner. | Reduction of GHG emissions and reduction of costs due to installation of solar power generation systems in business sites, investment in electrification of delivery vehicles, etc. Eligibility to receive public aid and tax reductions due to energy-saving measures. | Small | Medium |
| Market | Changes in Energy Costs | Increased facility and business site operation costs due to soaring cost of fossil fuels and electricity. | Expansion of opportunities to be a company of choice in recognition of our business development with emissions reductions and low environmental impact, driven by changes in market trends resulting from an increased focus on sustainability among consumers. | Medium | Medium | |
| Technology | Widespread Adoption of Low Carbon Technologies | Increased costs resulting from introduction of high-efficiency low-carbon technologies, facilities, and equipment. | Reduced costs such as fuel costs due to greater fuel efficiency of environmentally-friendly vehicles. | Medium | Medium | |
| Reduced energy costs due to introduction of logistics efficiency improvements and energy-saving equipment. | Medium | Medium | ||||
| Reputation | Changes in Reputation among Customers | Increased reputation risk if we are unable to take appropriate steps to reduce our environmental impact, such as reducing our GHG emissions. | Increased reputation improvement opportunities if we are able to take appropriate steps to reduce our environmental impact, such as reducing our GHG emissions. | Medium | Medium | |
| Physical Risks | Chronic | Increase in Average Temperature | Increased energy costs necessary for facility and business site air conditioning, refrigeration, etc. | Increased demand for providing services that take into consideration ventilation and comfort. | Medium | Medium |
| Changes in rainfall and weather patterns | Increased cost of wood procurement due to forest fires, tree pests, etc., leading to supply instability for products made using wood, such as disposable diapers, and rising procurement costs. Changes in food ingredient production amounts and production regions, leading to supply instability and rising procurement costs. | Efficiency improvement and diversification through review and revision of supply chain. | Medium | Large | ||
| Increased cost of wood procurement due to forest fires, tree pests, etc., leading to supply instability for products made using wood, such as disposable diapers, and rising procurement costs. Changes in food ingredient production amounts and production regions, leading to supply instability and rising procurement costs. | ― | Medium | Large | |||
| Acute | Growing severity of extreme weather | Increased capital investment costs due to improvements to produce greater resilience to extreme weather. Increased cost due to enhancement of disaster prevention equipment in preparation for disasters. | Establishment of effective and efficient disaster prevention system through intensification of disaster countermeasures across entire regions. | Medium | Large | |
| Increased costs due to need for alternative procurement for products and ingredients that are necessary for business but whose supply chains have been severed by disaster. | Efficiency improvement and diversification through review and revision of supply chain. | Medium | Large | |||
Scenario Analysis
Next, we performed analysis of the climate-related scenarios identified by the TCFD as being of special importance.
In defining these scenarios, we referred to the SSP scenarios and RCP scenarios of the IPCC's Sixth Assessment Report, and envisioned the following three scenarios: 1) Progressive scenario of a temperature increase of 1.5°C, 2) Standard scenario of a temperature increase of 2°C, 3) Stagnation scenario of a temperature increase of 4°C.
| No. | Scenario | Corresponding RCP Scenario |
Corresponding SSP Scenario |
Envisioned Temperature Increase |
Overview of Scenario |
|---|---|---|---|---|---|
| 1 | Progressive Scenario |
RCP1.9 | SSP1 | 1.5℃ | Social, economic, and technological innovation result in significant advances in the sustainability of societies worldwide. The global population continues to grow stably. Economic disparity (the gap between the rich and the poor) is mitigated to some extent, and national governments and political administration are stable. Climate change countermeasures by individual countries and global-scale regulations are made more rigorous, and for the most part there is little disparity between the policies of different countries. Within Japan, although the population continues to age and the birthrate remains low, labor market optimization measures by the government, etc. make it easier than previously to secure personnel in labor-intensive sectors. |
| 2 | Standard Scenario |
RCP4.5 | SSP2 | 2℃ | Social, economic, and technological innovation result in some advances in the sustainability of societies worldwide, but the amount of progress is not sufficient. Population growth slows in the latter half of the 21st century and the global population remains constant. Economic disparity (the gap between the rich and the poor) grows even greater, becoming a destabilizing factor for national governments and political administration. Climate change countermeasures by individual countries and global-scale regulations are made more rigorous, but not as rigorous as they need to be. Within Japan, the population continues to age, the birthrate remains low, and it continues to be difficult to secure personnel in labor-intensive sectors. |
| 3 | Stagnation Scenario |
RCP8.5 | SSP5 | 4℃ | Advances towards the sustainability of societies worldwide through social, economic, and technological innovation break down. Population growth declines significantly in the latter half of the 21st century. Economic disparity (the gap between the rich and the poor) becomes extreme and has a major impact on national governments and political administration. Climate change countermeasures by individual countries and global-scale regulations are out of step and ineffective. Within Japan, the aging population and the decline in birthrate grow more extreme, and this, together with a lack of countermeasures, makes it extremely difficult to secure personnel in labor-intensive sectors. |
As a result, we believe that the 4°C temperature increase scenario (scenario 3) would have a major impact on society, and we consider it essential that we help contribute to achieving scenario 1, in which the temperate increases by 1.5°C or less. We have defined this as one of the Group's key issues (materialities), "Promoting corporate activities that do not place an environmental burden."
Strategies and Initiatives Based on this Scenario
In the 1.5°C or below scenario, the impact of climate change would be mitigated, so we believe that the transition risks associated with the prevention of climate change would have a greater impact than the physical risks.
Based on this recognition, we have determined that if we fail to identify the environmental impact of the Group's business and invest in improvements to environmental performance, we will face a high risk of impact to our business, including a decline in our reputation within the market and the loss of customers.
We are currently determining our carbon dioxide emissions for fiscal year 2022. As part of that process, we are identifying specific items with particularly high environmental impacts and promoting measures to reduce those environmental impacts. Furthermore, in the 1.5°C or below scenario, we expect investors to have an even greater interest in issues related to climate change and greater expectation for the roles played by companies in this area. We will therefore actively disclose information regarding the status of our initiatives to combat climate change and other non-financial information.
The Group has already been working to foster understanding of environmental issues among employees, as well as working on environmental and resource-related measures such as reducing greenhouse gas emissions and using environmentally-friendly products.
- Switch to the use of LED lighting in facilities, etc. and introduce energy-saving air conditioners
- Use of FSC-certified paper made from wood grown in an environmentally-friendly manner
- Use of environmentally-friendly products and cleaners at Osoji Honpo
- Initiatives to eliminate workplace paper usage, etc.
Risk Management
In order to assess the status of our risk management and promote risk management activities, once every quarter, the Group holds a Risk Management Committee meeting, headed by our President, who is also our Chief Risk Management Officer. At the quarterly Risk Management Committee meetings, matrix analysis is performed on the results of risk assessments by each department, from the two perspectives of degree of impact and probability of occurrence. Risks are identified and evaluated, and the results are reported to the Board of Directors.
With regard to climate change risk, our Sustainability Promotion Department, which is our dedicated sustainability section, takes the lead in reviewing and revising our climate change-related risks and opportunities. The Sustainability Committee then leads the formulation of various policies and strategies, monitoring and managing the status of progress.
Indicators and Targets
We are currently measuring the Group's GHG emissions in fiscal year 2022, and going forward, we plan to integrate data from across our Group. We will promptly set medium- to long-term targets for reducing the environmental impact of our business activities and promote the reduction of Scope 1 and Scope 2 GHG emissions. With regard to Scope 3, we also plan to conduct a fact-finding study and collaborate with stakeholders to reduce GHG emissions. We will also regularly monitor our indicators and targets which we set.
By working to combat climate change through measures such as reducing GHG emissions, we will make the Group even more resilient and contribute to achieving carbon-free societies.