The Kito Group has endorsed the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) as established by the Financial Stability Board, has disclosed climate-related information based on the TCFD framework, and will continue to enhance its disclosure. Here are our policies and initiatives in the four TCFD-designated thematic areas representing core elements of how organizations operate: governance, strategy, risk management, and metrics and targets.
Governance
Risks and opportunities related to climate change are discussed in meetings of the executive officers and reported to the Board of Directors. Our sustainability measures, including those related to climate change, are handled by the Corporate Planning Division, which promotes risk management for the Kito Group.
Strategy
Kito has examined risks and opportunities that climate change poses to the Group. These risks and opportunities are related to transition to a low-carbon society and physical changes caused by natural disasters and other consequences of climate change. Kito has identified the risks and the opportunities, and evaluated their projected impact on our business in 2030 on three levels, based on two scenarios, in which global average temperatures increase by around 2℃ (the 2℃ scenario) or 4℃ (4℃ scenario) by 2100 from pre-industrial levels.
Serious: Serious impact on our business
Moderate: Partial impact on our business
Minor: Minor impact on our business
| Risks and opportunities item | Impact | ||||
|---|---|---|---|---|---|
| 2℃ | 4℃ | ||||
| Risks | Transition | Strengthening of regulations in various countries | – Decreases in product needs due to downsizing of specific industries (oil and coal industries) – Increases in taxes and material procurement costs due to introduction of carbon taxes and other policy enhancements – Increases in capital investment and response costs due to tighter emission regulations |
Moderate | Minor |
| Spread of low-carbon technologies | – Increases in R&D costs for new products and technologies due to intensifying competition in energy-saving performance of products | Minor | Minor | ||
| Changes in behavior of customers and shareholders | – Decline in corporate reputation and loss of business opportunities due to delays in environmental impact-reduction activities and information disclosure | Minor | Minor | ||
| Physical | Natural-disaster intensification | – Increases in capital expenditures and repair costs due to damage to production facilities and equipment caused by natural disasters – Production shutdowns and loss of sales opportunities due to supply-chain disruptions caused by natural disasters – Increases in costs of natural-disaster countermeasures and insurance premiums |
Minor | Minor | |
| Increase in average temperature | – Increase in costs for prevention of heat strokes due to an increase in extreme heat days – Partial suspension of business operations due to increased infectious diseases caused by changes in biological habitats |
Minor | Minor | ||
| Opportunities | Transition | Energy conservation and reduced carbon footprint | -Expansion of business opportunities through increased facility investment by related industries in green growth sectors -Decreasing energy costs through promotion of energy-conservation activities |
Moderate | Minor |
| Changes in behavior of customers and shareholders | -Improving corporate reputation and attracting ESG investment by expanding activities to reduce environmental impact | Minor | Minor | ||
| Physical | Natural disaster intensification | -Expansion of business opportunities due to increase in infrastructure and lifeline development as disaster prevention and mitigation measures -Increase in product needs due to reconstruction demand for buildings and infrastructure caused by natural disasters |
Moderate | Moderate | |
In the 2℃ scenario, demand for our products is expected to decrease due to business contraction in some industries (specifically oil and coal), taxes and raw material procurement costs are expected to increase due to the introduction of carbon taxes, and it will be important to respond to these issues. At the same time we project that a lower-carbon society will increase demand for renewable energy, which will provide opportunities to expand demand for our products in related industries.
In both the 2℃ and the 4℃ scenarios we find that natural disasters are expected to become more severe, and there will be opportunities to expand demand for our products with increases in construction of infrastructure and lifelines for disaster-prevention and mitigation measures.
Kito will respond to identified risks and opportunities, periodically review risks and opportunities in consideration of changes in external and internal circumstances, and enhance our disclosure of climate change-related information.
Major scenarios referenced
- Analysis of transition risks and opportunities
- IEA World Energy Outlook 2020
IEA Energy Technology Perspectives 2020
THE TRANSITION RISK-O-METER
- Analysis of physical risks and opportunities
- IPCC Climate Change 2014 Synthesis Report
Working on a WARMER planet
“The Japanese Climate at the End of the 21st Century” (Ministry of the Environment)
Risk Management
Kito has comprehensively identified various risks, including those related to climate change, that could result in economic loss, business suspension or discontinuance, loss of trust or brand image, or prevent us from achieving our corporate philosophy, business goals, or business strategies. The identified risks are managed in accordance with our internal rules for risk management (“Risk Management regulations”).
Metrics and Targets
Kito has set targets for reducing greenhouse-gas emissions and is promoting initiatives to achieve them.
| Metrics | Base Year | Target Year | Target |
|---|---|---|---|
| CO2 Emission Reduction Scope 1 and 2 | FY2019 | FY2026 | Reduction by 50% |
Targets for reducing CO2 emissions, including those from Group companies, will be set after considering specific measures. Please see below for environment-related performance data.