In August 2021, HAZAMA ANDO CORPORATION publicly endorsed the "Task Force on Climate-Related Financial Disclosures (TCFD)" and participated in the "TCFD Consortium." As such, we would like to take this occasion to announce that we have made disclosures based on the TCFD recommendations.
In acknowledgement that addressing climate change is one of our most important management challenges, the Group stated "Protection of and Harmony with the Global Environment" as one aspect of materiality, and have engaged in various undertakings to this end. In addition, we have accelerated efforts to obtain approval from SBT of our medium- to long-term greenhouse gas emissions reduction target and membership in RE100 in 2019. By disclosing climate-change related information in line with the TCFD recommendations going forward, we will pursue a greater degree of decarbonization and thereby contribute to achieving a sustainable society.
(Reference) "Task Force on Climate-Related Financial Disclosures (TCFD)"
In response to the demands of the G20, the Financial Stability Board (FSB), in which the central banks and financial authorities of various countries, as well as international institutions, participate as members, established the TCFD in order to investigate approaches to disclosing climate-relate information and the response of financial institutions.
The TCFD released its Final Report in 2017, which contained recommendations for companies covering how they should assess any financial impacts that the risks and opportunities invited by climate change will have on their management, as well as disclosures related to "Governance," "Strategy," "Risk management," and "Metrics and Targets."
1. TCFD Recommendations and the Group’s Disclosures
Response to "risks" and "opportunities" stemming from climate change issues
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The Group stated "protecting and being attuned to the natural environment" as one aspect of materiality, and acknowledge that addressing climate change is one of our most critical management issues. We have therefore comprehensively identified and analyzed physical risks and transition risks stemming from climate change issues. In working to address the need to avoid these risks and capture opportunities, we are strategically engaged in managing climate change while enhancing our resilience as a company.
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In August 2021, we publicly endorsed the Task Force on Climate-Related Financial Disclosures (TCFD), and now actively disclose information related to climate change issues in line with the TCFD recommendations.
TCFD content index
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The following table outlines the TCFD recommendations and the details of the Group’s disclosures.
2. Governance
The Group's governance framework for managing risks and opportunities stemming from climate change
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The Environmental Strategy Committee deliberates on risks and opportunities stemming from climate change. Representatives of the business departments and the executives serve as members of the Environmental Strategy Committee, which meets four times each year to identify risks and opportunities, analyze their impact should they emerge, and investigate responses to such. The results of these deliberations are reported to the Board of Directors through the Management Council.
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The Internal Control and Risk Management Committee investigates and deliberates on risk management regarding climate change and other risks with the potential to significantly impact business, and reports to the Board of Directors after deliberation by the Sustainability Committee. This Committee coordinates with the Environmental Strategy Committee in its response to risks stemming from climate change.
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The Group's organizational framework for addressing climate change is shown below.
3. Strategy
Climate-related risks and opportunities identified through scenario analyses, and their financial impacts on the Group’s businesses
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The Group conducted scenario analyses for the years 2030 and 2050 under the assumption of three temperature zones, namely 1.5°C, 2°C, and 4°C, as future warming scenarios.
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The Group conducted importance assessments and financial impact analyses with reference to the scenarios disclosed by government bodies and research institutions listed in the following table.
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In order to assess climate-related risks and opportunities, the Group used Scope 1, 2, and 3 emissions, power consumption, carbon price estimations referenced from each scenario, and the increase in the ratio of the number of hot summer days, etc., as parameters (metrics).
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The following table lists the risks and opportunities stemming from climate change, and the importance of each risk and opportunity (extent of impact) that will have an impact on the Group's businesses as assessed using these parameters.
◆Risks
◆Opportunities
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The Group revised our environmental policy in April 2018 as a means of further accelerating environmentally centered management targeted at achieving a low-carbon, recycling-oriented, and nature-symbiotic society. Since the fiscal year ended March 2023, we have consistently put our environmental targets into practice under a series of new (three-year) environmental targets and goals. Moreover, we have engaged in initiatives to realize a decarbonized society through target approval by SBT and membership in the RE100.
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Specifically, we have engaged in the following countermeasures to avoid these risks and capture opportunities (including measures under investigation).
4. Risk Management
Processes for identifying, assessing, and managing climate-related risks
The Group has identified the risks and opportunities stemming from climate change under the guidance of the Environmental Strategy Committee.
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Specifically, we identified the impacts on the Group as a whole and the potential impacts on each process (development/engineering -> material procurement -> construction -> maintenance/repair) with our supply chain and value chain in mind, and assumed the potential financial impacts under 1.5°C, 2°C, and 4°C scenarios. We also assessed each risk and opportunity on a three-step scale and made a comprehensive assessment of their importance using the assessment axes of "occurrence frequency," "impact duration," "impact severity," "correlation with core businesses," "emergence potential," and "emergence timing."
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Under the oversight of the Board of Directors and Sustainability Committee, the Environmental Strategy Committee as well as Internal Control and Risk Management Committee have taken the lead in handling risk management throughout each Group company in regard to the identified risks. This effort includes formulating policies and proposing countermeasures related to risk avoidance, mitigation, transfer, and ownership. Moreover, these Committees monitor the implementation status of each countermeasure as well as their results.
5. Metrics and Targets
Metrics using climate-related risk and opportunity analyses, and correlation with and targets for Scope 1, 2, and 3 emissions
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The Group’s Scope 1, 2, and 3 emissions are metrics that are impacted by climate-related risks and opportunities. For example, the adoption of a new carbon tax will lead to financial impacts such as higher energy costs and higher prices for materials to be procured.
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Scope 1, 2, and 3 emissions serve as parameters (metrics) that are directly linked to financial impacts, so we are striving to reduce Scope 1, 2, and 3 emissions in order to mitigate this impact. Meanwhile, the Group has set Scope 1 and 2 emission targets based on a 1.5°C scenario and a Scope 3 emission target based on a WB2.0°C scenario to achieve carbon neutrality in 2050. Moreover, the Group has also joined RE100.
Table 1: GHG emissions reduction targets
Table 2: RE100 related renewable electricity consumption targets
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GHG emissions and the renewable energy adoption ratio for the Group's most recent fiscal year are disclosed on our website and in the Sustainability Report.
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We will continue to implement countermeasures intended to mitigate risks and capture opportunities involving these metrics, and will steadily promote initiatives to achieve a decarbonized and recycling-oriented society for the purpose of passing on an abundant global environment to future generations.