Basic Approach to Climate Change Issues
We recognize that climate change is one of the most important management issues affecting our business activities, and we are working to mitigate it, while taking into account the risks and opportunities that climate change poses to our Group's business environment.
In light of the importance of accurately communicating the impact of climate change on our Company to our stakeholders, we have endorsed and signed the TCFD (Task Force on Climate-related Financial Disclosure).
In accordance with their recommendations, and based on information from the Intergovernmental Panel on Climate Change (IPCC) and the World Wide Fund for Nature (WWF), we have begun analyzing the "4°C scenario," in which the global average temperature rises 4°C compared to pre-industrial levels without any measures being taken, and the "2°C scenario," in which measures are taken to limit the rise in temperature to 2°C, in terms of both risk and opportunity.
In our Mid-Term Management Plan "Challenge 2024," which aims to realize a sustainable society, we will continue to update and expand the scope of our research by improving the accuracy of our analysis and concretely reflecting the results in our management and business strategies by making the indicators more concrete, thereby improving the resilience of our management.
"Task Force on Climate-related Financial Disclosures" established by the Financial Stability Board (FSB) at the request of G20 finance ministers and central bank governors
Recommended Disclosure Items Based on the TCFD Recommendations
We will disclose climate change-related information on the following four themes recommended in the TCFD recommendations.
| Governance | The organization's governance around climate change risks and opportunities |
|---|---|
| Strategy | The actual impacts and potential threats of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning |
| Risk management | The processes used by the organization to identify, assess, and manage climate change-related risks |
| Metrics and targets | The metrics and targets used to assess and manage relevant climate change-related risks and opportunities |
Governance
Expectations for companies to solve climate change and other social issues are growing rapidly, making it increasingly important for us to reflect ESG initiatives in management. The Group believes the pursuit of social value creation as well as growth is essential for achieving sustainability (medium- to long-term sustainability, including ESG factors), and is therefore carrying out promotional measures via the following promotion system (Please see here for our Sustainability Promotion System Diagram).
Promotion Framework
We have established a Sustainability Committee under the supervision of the Board of Directors, chaired by the Representative Director and President and composed of all Directors and Executive Officers as well as Outside Audit & Supervisory Board Members, to promote activities.
The Committee deliberates on and formulates policies, strategies, plans, and measures concerning sustainability, including climate change countermeasures, and identifies issues facing each Group company and clarifies measures to strengthen and improve them.
Deliberations are reported to the Group Management Strategy Meeting, the Management Meeting, and the Board of Directors as appropriate.
The Board of Directors will promote active and proactive discussions on sustainability issues.
The committee set up an environment and climate change-related agenda and has formulated policies on carbon neutrality and environmental management, including setting CO2 emission reduction targets, calculating the Group's emissions across Scope 1, 2, and 3 to reduce supply chain emissions, and procurement policies aimed at achieving sustainable procurement.
Strategies
In accordance with TCFD recommendations, we began analyzing the "4°C scenario" and the "2°C scenario" in terms of both risks and opportunities.
The repercussions of each scenario and major impact on our Group are shown on the right.
While climate change is a risk to our business activities, we recognize that it also represents an opportunity to enhance the value of our products and service offerings and our corporate value.
In accordance with our Basic Policy for Sustainability, we promote the provision of decarbonization products and services that address climate change and limit its progression, and the creation of new businesses.
We aim to improve the accuracy of our analysis and assessment of the real and potential impacts of climate change risks and opportunities on our business activities, strategic and financial plans, and identify key impacts of high priority, and consider countermeasures.
These results will be supervised by the Board of Directors, and efforts will be made to reflect them concretely in management strategies as appropriate to improve management resilience, and will be disclosed as soon as they become available.
The repercussions of each scenario and major impact on our Group
*This table can be scrolled horizontally.
| Changes related to climate change | Major impact | Main repercussions on our Group | Detailed repercussions | |||
|---|---|---|---|---|---|---|
| 4°C | Risk | Physical risk*1 | Chronic risk*2 | Changes in precipitation and weather patterns | Rising temperatures and water shortages | Decline in production efficiency, rising costs of countermeasures, reconsideration of work styles |
| Decline in hydroelectric power plant operation | ||||||
| Acute risk*3 | Change in lifestyle | Increased risk of infections | Employee health considerations | |||
| Opportunity | Markets, products and services | Lifestyle changes due to rising temperatures | Increased demand for products and services that adapt to ongoing climate change | Total switch to flares with glass crushers | ||
| Increased demand for beverages | ||||||
*This table can be scrolled horizontally.
| Changes related to climate change | Major impact | Main repercussions on our Group | Detailed repercussions | |||
|---|---|---|---|---|---|---|
| 2°C | Risk | Migration risk*4 | Legal and regulatory risks | Introduction of carbon pricing | Carbon tax accruals | Increase in costs |
| Technology risk | Tighter CO2 emission regulations | Energy conservation measures need to be strengthened and manufacturing facilities must be upgraded to higher efficiency. | Increase in capital expenditure | |||
| Market risk | Expansion of renewable energy | Increase in energy costs | Increase in manufacturing costs | |||
| Reputation risk | Change in investor valuation | Insufficient action on climate change will lead to deterioration of investor reputation and difficulty in obtaining financing. | Reduction in investment. | |||
| Changes in customer requirements. | Insufficient action on climate change will result in exclusion from the supply chain. | Decrease in sales of relevant products. | ||||
| Opportunity | Markets, products and services | Lifestyle changes due to increased environmental awareness. | Increase in demand for environmentally friendly products and services that contribute to climate change mitigation. | Increase in demand for electrolytes for regenerative energy applications. | ||
| Popularization of electric vehicles | ||||||
| Realization of a hydrogen recycling society | ||||||
| Increase in storage battery demand | ||||||
*This table can be scrolled horizontally.
| Changes related to climate change | Major impact | Main repercussions on our Group | Detailed repercussions | ||
|---|---|---|---|---|---|
| Common to 2°C and 4°C scenarios | Opportunity | Resource efficiency | Promotion of energy conservation and reduction of waste disposal. | Cost reduction | Reduction of fuel and electricity costs |
| Energy | Promotion of energy creation | Promotion of procurement of clean energy | Continued operation of hydroelectric power plants and promotion of switching to solar power generation. | ||
| Resilience | Planned climate change measures reflected in management | Risk mitigation | Fire insurance with water damage coverage, reinforced waterproofing facilities. | ||
- Physical risk = Disasters and other damage caused by climate change
- Chronic risk = Impacts from long-term changes in precipitation patterns, changes in weather patterns, and increases in average temperatures and sea levels.
- Acute risk = Impact of extreme weather events such as typhoons, floods, storm surges, etc.
- Transition risk = Risks arising from the transition to a decarbonized society aimed at mitigating climate change.
Risk Management
Natural disasters, outbreaks of infectious diseases, and other factors may have a significant impact on the economic environment, cause damage to production facilities, harm human resources, and also cause major changes in customer demand.
We recognize that these are among the key risk factors that could significantly affect our performance and financial position.
In order to further strengthen risk management and take appropriate measures, the Corporate Planning Department is responsible for major impacts on the economic environment, the Human Resources Department and the General Affairs Department are responsible for major harm to personnel, and the Public Relations & Sustainability Group is responsible for disclosing these to stakeholders in a timely and appropriate manner.
Furthermore, the Production and Quality Management Department was established in fiscal 2021 to strengthen risk management for production activities and product quality.
We also established a Group Risk Management Committee chaired by the Representative Director and President to establish a comprehensive risk management framework, including climate change risks.
We will continue to make further efforts to ensure that risk information collected from each Group company is reported to management in a timely manner, and that risks throughout the Group are detected without fail, prioritized for countermeasures, and management decisions are made without delay.
Indicators and Targets
Global warming caused by climate change has resulted in extreme weather events, such as torrential rains, heat waves and droughts, which have caused significant damage to the natural environment, including floods and droughts.
Our Group recognizes that climate change is one of the most important social issues to be resolved, especially since the Group is built on the bounty of abundant natural resources such as water.
To achieve carbon neutrality by 2050, we will actively work to reduce greenhouse gas emissions by promoting energy conservation measures and the use of renewable energy.
We will also strive to improve the scope of disclosure of energy consumption and CO2 emissions data.
Supply chain emissions
Our Group has calculated supply chain CO2 emissions (Scope 1, 2, and 3) as an indicator to measure and manage risks and opportunities related to climate change.
We will work to reduce greenhouse gas emissions by establishing a framework for regular management of real emissions.
GHG emissions calculation and visualization cloud service "zeroboard"* is used for the calculation.
"Zeroboard" was audited by SOCOTEC Certification Japan, the Japanese subsidiary of the international certification organization SOCOTEC, to ensure that it is properly designed in accordance with ISO14064-3, and is compliant with the GHG Protocol "Corporate Accounting and Reporting Standard" and "Corporate Value Chain (Scope 3) Accounting and Reporting Standard", "GHG Protocol Scope 2 Guidance", "ISO14064-1" and "Basic Guidelines for Accounting for Companies' Greenhouse Gas Emissions Throughout the Supply Chain (ver. 2.3)" (Ministry of the Environment).
Actual supply chain CO2 emissions in FY2022
Results from Carlit Holdings, Japan Carlit, JC Bottling, Silicon Technology, Namitakiko, Toyo Spring Industrial, and Fuji Shoji
- Direct emissions from in-house fuel use
- Indirect emissions from the use of electricity, heat and steam supplied by other companies
- Indirect emissions that occur in upstream (raw materials, transportation, commuting, etc.) and downstream (use and disposal of products, etc.) activities
Our supply chain CO2 emissions are calculated by the GHG emissions calculation and visualization cloud service of Zero Board Co.
"Zeroboard" was audited by SOCOTEC Certification Japan, the Japanese subsidiary of the international certification organization SOCOTEC, to ensure that it is properly designed in accordance with ISO14064-3, and is compliant with the GHG Protocol "Corporate Accounting and Reporting Standard" and "Corporate Value Chain (Scope 3) Accounting and Reporting Standard", "GHG Protocol Scope 2 Guidance", "ISO14064-1" and "Basic Guidelines for Accounting for Companies' Greenhouse Gas Emissions Throughout the Supply Chain (ver. 2.3)" (Ministry of the Environment).
Please refer to the "ESG Data" for details of the data.Supply chain emission reduction targets
To realize a sustainable society, we are committed to achieving carbon neutrality throughout our business activities and supply chain by 2050.
For Scope 1 and 2, we have set a milestone of a 46% reduction compared to the fiscal 2013 level by 2030.
To achieve our goals, we will work to promote energy conservation and energy creation, promote the use of renewable energy, and expand the scope of information disclosure on related energy consumption.
Scope 3 emissions account for approximately 80% of the Group's total emissions, and we recognize that reducing Scope 3 emissions is essential to achieving a decarbonized society.
In particular, Category 1, which corresponds to products and services purchased, accounts for approximately 70% of Scope 3.
In order to achieve decarbonization through the supply chain, we will work to strengthen communication with suppliers through sustainable procurement questionnaires and emission accounting systems, and promote efforts to reduce carbon emissions. We will also work to set Scope 3 reduction targets by 2030 with a view to achieving carbon neutrality by 2050.
Climate Change Opportunities
We recognize that while climate change poses a risk to business activities, it also presents opportunities, and we are working to address climate change, provide products and services aimed at decarbonization to limit its progress, and promote the creation of new businesses.
Example of a product that addresses climate change -Flamethrowers with glass breakers-
In recent years, the occurrence of torrential rains has increased, resulting in many fatal accidents involving people trapped in their cars due to flooded roads and overflowing rivers.
According to a Kyodo News survey, approximately 30% of the people who died due to Typhoon No.19 in 2019 were caught in floods.
If a car is submerged to a certain depth, water pressure builds, making it difficult to open the doors.
Further flooding may cause the electrical systems to fail, preventing power windows from opening.
JAF (Japan Automobile Federation) experiments have shown that side glass cannot be broken by anything other than devices specifically designed for escape, due to the difficulty of exerting force in a confined car and the resistance of water when submerged.
The Ministry of Land, Infrastructure, Transport and Tourism recommends breaking the side glass with a glass breaker to escape, while the National Consumer Affairs Center of Japan recommends installing a hammer or similar device for emergency escapes.
Japan Carlit Co., Ltd., which boasts the top share of the automotive emergency safety flares market, manufactures and sells the "Super Hiflare + Pick," which has an escape glass breaker attached to its tip.
In addition to contributing to increased safety in the event of automobile accidents and breakdowns, we are appealing to customers to switch from regular products as a way to prepare for safety in response to climate change.