We have positioned climate change as one of our most important management issues. In addition to promoting initiatives recommended by the TCFD*, we strive to disclose information on the four core elements of governance, strategy, risk management, and indicators and targets.
Abbreviation for the Task Force on Climate-related Financial Disclosures.
GHG emissions reduction target (Base year: FY2023)
| FY2030 | FY2050 | |
|---|---|---|
| Scope 1, 2 | Reduction of 50% or above | Net zero |
Governance
We have established a Sustainability Committee with the Representative Director, President, and CEO serving as the chairman. The committee, entrusted by the Board of Directors, formulates policies and manages progress on sustainability issues, including climate change. Important matters are reported to the Board of Directors for deliberation. In July 2023, after deliberation by the Sustainability Committee, our materiality, including the perspective of climate change, was identified and approved by the Board of Directors.
Strategy
Scenario analysis
We conducted a scenario analysis to recognize the risks and opportunities posed by climate change and to validate current measures, with the aim of applying them to future business strategies. In 2022, the first year of the analysis, we qualitatively analyzed transition risks and physical risks associated with climate change in accordance with the framework of the TCFD, and assessed the impact of each on three levels: large, moderate, and small. In the analysis, we referred to information from organizations such as the IEA and IPCC and adopted scenarios of +1.5 to +2 degrees Celsius and +4 degrees Celsius. In the +4 degree Celsius scenario, although the impact of transition risks such as regulations is small due to the extension of current policy, it is assumed that the worsening of natural disasters will progress and physical risks such as abnormal weather will increase.
In a world where the temperature rises by 1.5 to 2 degrees Celsius, climate-related policies such as GHG emission regulations will be strengthened, and although the impact of transition risks will increase, it is estimated that the physical risks will be limited compared to +4 degrees Celsius as a result of these policies. By considering our business activities in different weather conditions and social environments, we aim to enable sustainable management in a variety of environments.
| +1.5 to +2 Degree Celsius Scenario |
+4 Degree Celsius Scenario |
|
|---|---|---|
| Policy | Carbon tax introduced Various climate change measures introduced |
Carbon tax not introduced Various climate change measures not introduced |
| Electricity | Electricity prices rise |
Electricity prices fall |
| Crude Oil | Crude oil prices fall | Crude oil prices rise |
| Consumer Awareness | Rising temperatures raise awareness of environmental issues such as climate change, and sustainable lifestyles become established | Rising temperatures raise awareness of environmental issues such as climate change |
| Climate | Amount of heavy rains and typhoons increase Temperature rises by 2 degrees Celsius |
Amount of heavy rains and typhoons increase (more frequent than a world with +2 degree Celsius rise) Temperature rises by 4 degrees Celsius |
Significant Risks and Opportunities
Demand for environment-related systems is expected to increase in both scenarios with a +1.5 to +2 degree Celsius and +4 degree Celsius increase. We believe this to be a factor that will increase our chances of receiving orders for these systems, as well as helping to mitigate climate change and resolve the problems caused by it. Although the introduction of carbon taxes and fluctuations in electricity prices are expected in these countries, we believe that the negative impact of electricity usage on our finances will be limited.
Significant risks
| Significant risks | Category | Degree of Impact | Impact on Business | |
|---|---|---|---|---|
| Risk of reduced customer loyalty due to poor climate change evaluation | Reputation | Customer loyalty | Moderate | If we do not promote the environmental contributions of provided systems (low GHG emissions, contribution to green innovation, etc.), the evaluation of the systems from customers will decrease and so will business opportunities |
| Risk of difficulty in securing human resources due to low evaluation of climate change | Human resources recruitment | Moderate | If we do not promote the environmental contributions of provided systems (low GHG emissions, contribution to green innovation, etc.), the number of job applicants will decrease, making it difficult to secure human resources | |
| Risk of investment slowdown due to poor climate change evaluation | Investor loyalty | Moderate | If we do not promote the environmental contributions of provided systems (low GHG emissions, contribution to green innovation, etc.), the evaluation of the systems from investors will decrease and so will our stock price | |
Significant opportunities
| Significant Opportunities | Category | Degree of Impact | Impact on Business | |
|---|---|---|---|---|
| Increase in demand for GHG emission measurement systems | Policies and regulations | Carbon prices | Moderate | Introduction of a carbon tax increases the demand for GHG emission measurement, leading to an increase in demand for related systems (No effect if +4 degrees Celsius) |
| Increase in demand for logistics-related systems due to the rise in fossil fuel costs | Fossil fuel subsidies | Large | Fossil fuel costs soar due to the lifting and reduction of fossil fuel subsidies. As a result, the diversification of fuels and the restructuring of logistics networks will become invigorated, and the demand for related systems will increase | |
| Increased demand for systems due to the growth of the low-carbon market and the spread of new technologies | Technology | Promotion of low-carbon and next generation technologies | Large | Growth in the low-carbonization-related market, especially in the power storage and motor-related markets, will lead to an increase in the construction of smart factories and other facilities. As a result, the demand for related systems will increase |
| Increased purchasing costs for customers. Demand for supply chain and price management systems increases |
Industry and market | Fluctuation in raw material costs | Large | Increased raw material costs for customers. Increased demand to understand procurement costs and supply chains, and for procurement price calculation systems |
Risk Management
In order to minimize losses by understanding risks and responding appropriately, we have appointed the Representative Director, President, and CEO as the Chief Risk Management Officer. In addition, the Risk Management Committee, which consists of full-time officers and persons responsible for each division, was put in place and meets quarterly to understand overall risks related to the Company’s management, such as the business environment and organizational structure, and to consider countermeasures. With regard to climate change-related risks, we identify and evaluate risks under this system, and formulate and implement measures to reduce them.
Indicators and Targets
We understand Scope 1 and Scope 2 GHG emissions and are committed to reducing them. We plan to set KPIs for materiality and emissions reduction targets for Scope 1 and 2 in 2024. We also worked on calculating Scope 3 emissions on a non-consolidated basis in 2023. Moving forward, we aim to include Scope 3 in figures for the entire group.
Scope 3 Emissions Breakdown by Category (non-consolidated)*1（t）
| FY2023*2 | FY2024 | ||
|---|---|---|---|
| Non-consolidated | Non-consolidated | Consolidated | |
| Category 1 Purchased goods and services |
10,715.83 | 12,724.35 | – |
| Category 2 Capital goods |
135.13*3 | 54.28 | – |
| Category 3 Fuel- and energy-related activities (not included in Scope 1 or Scope 2) |
14.04*4 | 14.59 | – |
| Category 4 Transportation and delivery (upstream) |
0.06 | 0.04 | – |
| Category 5 Waste generated in operations |
2.53 | 0.09 | – |
| Category 6 Business travel |
47.80 | 72.85 | 98.15 |
| Category 7 Employee commuting |
36.27 | 78.15 | 118.19 |
| Category 8 Leased assets (upstream) |
3.16 | 6.07 | – |
| Category 15*5 Investments |
– | – | – |
- Categories 9, 10, 11, 12, 13, and 14 are not applicable.
- The data for FY2023 has been recalculated due to a review of emission factors. The impact is minor.
- Emissions temporarily increased due to office layout changes at our head office.
- We additionally aggregated data for Category 3.
- We have not aggregated data for Category 15 as it is difficult to calculate.