Our Commitment to Climate Change (Response to TCFD Recommendations)

To help create a sustainable society, we have set quantitative and qualitative management targets to be achieved by 2030 as the Mid- to Long-Term Management Goals 2030, stepping up efforts to be carbon neutral by 2050. In July 2021, we announced our support for the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). This section shows our scenario analysis, strategies, indicators and targets in line with the TCFD framework for disclosure.

Governance and risk management

We established the Group Sustainability Committee to oversee the environmental activities of the entire group, and regard the organization as a key committee of the Group along with the Group Risk and Compliance Committee.

The Group Sustainability Committee, chaired by the president of the Group and attended by presidents of major group companies, meets once a year in principle. The committee discusses matters related to the enhancement of sustainability management, including the formulation of sustainability action plans and reviews of their progress, to modify existing measures and develop new measures in light of the current progress in achieving plans and targets, social and international circumstances, legal and regulatory trends, and changes in the external environment.

The significant environmental risks related to climate change that are discussed in the Group Sustainability Committee will be reported to the Group Risk and Compliance Committee. These issues then will be reported to the Management Strategy Meeting and the Executive Management Meeting, as necessary, to be reflected in our corporate strategies. The activities of the Group Sustainability Committee are reported to and supervised by the Board of Directors without delay after the committee meeting.

In fiscal 2021, we introduced a performance-linked equity compensation plan for directors (excluding outside directors). To enhance our sustainability efforts including climate change adaptation, we use a sustainability index as part of the basis for calculating the amount of equity compensation. The index is determined by taking account of the general progress of sustainability initiative targets and other ESG-related activities.

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Strategy

Selecting climate change scenarios

We referred to the climate change scenarios published by the International Energy Agency (IEA), and chose the 1.5℃, 2℃, and 4℃ warming scenarios. We have analyzed the impact of climate change over the period through 2030, as we understand that such impact becomes gradually apparent over the medium to long term. Our first scenario analysis conducted in fiscal 2021 covered metal and plastic containers of our domestic packaging business.

Source: the IPCC Fifth Assessment Report

■ 4℃ scenario (equivalent to RCP 8.5)
Temperature is likely to be 3.2-5.4℃ above pre-industrial levels by the end of this century without stronger measures against global warming.

■ 1.5-2℃ scenario (equivalent to RCP 1.9-2.6)
Temperature rise could be reduced to 0.9-2.3℃ with stronger measures against global warming.

Process of scenario analysis

Identifying significant risks and opportunities

Gather information on risks and opportunities in the packaging industry.
Identify potential transition and physical risks and opportunities for the Group from the perspectives of government policies and the market.
Examine impacts of the identified risks and opportunities on our operations and specify significant risks and opportunities which may have material impacts.

Collecting future prediction data

Collect external future prediction data that is highly reliable on significant risks and opportunities.
Organize the future prediction data for each scenario and internally discuss possible future prospects.

Estimating business impacts

Quantify business impacts of significant risks and opportunities for each scenario using collected future prediction data and in-house data.

Taking countermeasures

Consider measures to address climate change-related risks and opportunities with material impacts on our business.
Develop a framework to take additional measures, as necessary.

Results of analysis

We have organized the major climate change risks and opportunities in Japan, where the Group conducts its packaging business, using external information, and collected future prediction data for the individual risks and opportunities. Based on the data, we have examined risks and opportunities following the transition to a zero-carbon society as well as physical risks and opportunities arising from climate change, in order to identify significant risks and opportunities that may impact our operations by 2030.

As a result, we have identified the risk of higher operating costs due to carbon taxes on greenhouse gas (GHG) emissions, among other risks, under the 1.5 and 2℃ scenarios in which policies against climate change are likely to be implemented. At the same time, we have confirmed that we can mitigate the impact of climate change to a certain degree by achieving GHG emission reduction targets in our Eco Action Plan 2030. From fiscal 2022, we have introduced an internal carbon pricing (ICP) program as a means of reducing risks and expanding opportunities. We apply our internal carbon price to CO₂ emissions from capital investments, converting the emissions into cost values, which we use as a reference when making our investment decisions. Through these efforts, we will strengthen our operations in an environmentally friendly manner.

Going forward, we will expand the scope of our scenario analysis and assess impacts on glass and paper containers of our domestic packaging business and major products of our functional materials business.

Chart of analysis results

Transition risks and opportunities

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Significant risks and opportunities		Time frame	Description of risks and opportunities	Financial impact assessed	Financial impact of each scenario		Current and future actions
Significant risks and opportunities		Time frame	Description of risks and opportunities	Financial impact assessed	4℃	1.5-2℃	Current and future actions
Carbon pricing/ national carbon emissions targets and policies	Carbon tax burden	Medium	Carbon taxes are imposed on CO₂ emissions from fossil fuels.	Rise in operating costs due to carbon taxation on GHG emissions⁽¹⁾			Reduce GHG emissions from operations by 50% by 2030.⁽²⁾
	Electricity price fluctuations	Short	Renewable energy charges surge as the power grid shifts to renewable sources.	Fluctuations in operating costs due to electricity price variations			Introduce solar power generation systems. Accelerate energy saving investment by using ICP.
Introduction of new regulations	Decline in net revenue due to plastic taxation	Medium	Plastic taxes are imposed on packaging made of virgin plastic.	Decline in net revenue when taking account of plastic tax burden			Convert all packaging products to recyclable/reusable.⁽²⁾ Increase the ratio of recycled materials used in products.
	Compliance with the mandatory use of recycled plastics	Medium	A minimum percentage of recycled plastic used in beverage bottles is set.	Rise in costs due to a higher ratio of recycled plastic in raw materials			Reduce the use of fossil resources for plastic products by 40% by 2030.⁽²⁾
	Rise in base paper prices due to forest taxation	Medium	Base paper prices rise as a result of forest taxation on paper manufacturers.	Rise in base paper costs due to forest taxation			Use easy-to-recycle base paper for paper cups.
Fluctuations in raw material prices	Rise in petrochemical material prices due to higher crude oil prices	Short	Petrochemical material prices fluctuate as the demand and supply balance and price of oil change.	Fluctuations in costs due to changes in prices of oil and petrochemicals			Reduce the use of fossil resources.⁽²⁾ Achieve practical application of chemical recycling.
Fluctuations in raw material prices	Rise in raw material prices due to carbon taxation	Medium	Taxation on CO₂ emissions from oil and metal refining, coking, and paper and glass production pushes up raw material prices.	Rise in costs of petrochemicals, steel, aluminum, base paper and glass due to higher carbon tax rates⁽¹⁾			Reduce the use of fossil resources.⁽²⁾ Use biomass materials. Use steel and aluminum produced through a low-carbon process. Supply easy-to-recycle glass bottles; use easy-to-recycle base paper for paper cups.
Changes in consumer behavior	Rise in demand for eco-friendly products	Medium	Eco-friendly products gain competitiveness as consumer preference changes.	Growth in sales of eco-friendly products due to greater environmental awareness			Boost the line-up of eco-friendly products to increase their sales. Step up investment in high-potential eco-friendly products.
Rise in demand for low-carbon and next-generation technologies	Rise in demand for battery components due to growing popularity of EVs and PHEVs	Medium	Demand for EV/PHEV battery components and materials increases.	Growth in sales of battery components and materials due to growing popularity of EVs and PHEVs			Step up investment in production of EV/PHEV battery components and materials to expand production capacity.	～

Notes:　
1. Financial impact under the 1.5℃ scenario
2. Targets in the Eco Action Plan 2030

Physical risks

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Significant risks and opportunities		Time frame	Description of risks and opportunities	Financial impact assessed	Financial impact of each scenario		Current and future actions
Significant risks and opportunities		Time frame	Description of risks and opportunities	Financial impact assessed	4℃	1.5-2℃	Current and future actions
Rise in average global temperature	Fluctuations in sales due to changes in output of agricultural raw materials	Long	Agricultural production fluctuates and demand for beverages grows as the average temperature rises.	Fluctuations in packaging sales due to changes in production of barley, tea leaves, coffee beans and higher grade rice and demand for beer and tea drinks			Fluctuations in agricultural raw material output have a minor impact on sales. Future risk factors.
	Rise in air conditioning costs in summer	Medium	Rising temperatures push up air conditioning costs in summer.	Rises in air conditioning power consumption and operating costs due to rising temperatures			Install rooftop solar panels. Use energy-saving heat pumps.
	Rise in base paper prices due to forest fires	Long	Pulp supply declines due to more frequent forest fires.	Rise in base paper costs due to frequent forest fires			Use easy-to-recycle base paper for paper cups.
	Fluctuations in demand for insecticides	Long	Demand for insecticides grows as the average temperature rises in summer.	Growth in sales of aerosol cans due to increased demand for insecticides			Enhance the insecticide filling operations to flexibly respond to demand changes.
Intensifying extreme weather	Property damage and lost profits due to natural disasters	Short	Delays in production and suspension of product supply occur due to damage to our facilities caused by natural disasters.	Property damage costs and lost profits arising from natural disasters			Review natural disaster risks that were previously identified. Develop BCP and conduct drills.
Intensifying extreme weather	Rise in insurance premiums	Short	Increased natural disaster risks for our facilities raise insurance premiums.	Rise in insurance costs due to increased flooding and typhoons			Review insurance contracts to improve their cost-effectiveness.

Financial impact :

Positive, 10 billion yen or more：
Positive, less than 10 billion yen：
Positive/negative, less than 1 billion yen：
Negative, less than 10 billion yen：
Negative, 10 billion yen or more：

Indicators and targets

As a long-term goal for 2050, we aim to significantly reduce CO₂ emissions to realize carbon neutrality. To this end, we have set CO₂ emission reduction targets for 2030 in our Eco Action Plan 2030 as shown to the right. These targets have been approved by the Science Based Targets initiative (SBTi) under its updated target validation criteria for the 1.5℃ scenario.

Changes in CO₂ emissions from operations (Scope 1 and 2)^(1)(2)(3)

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Notes:　
1.In November 2021, we raised the emissions reduction target from 35% less to 50% less, compared to fiscal 2019.
2.We have changed the scope of data collection to solely include Toyo Seikan Group Holdings and its consolidated subsidiaries from the data disclosed in July 2022, excluding affiliates accounted for using equity method that were previously included, and therefore the figures published here are not comparable to those published previously.
3.We have corrected the double-counting of emissions we found for some overseas subsidiaries and accordingly revised the sums of emissions from domestic and overseas operations for previous fiscal years.

GHG emissions from supply chain (FY2021)⁽¹⁾

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Notes:　
1.We have changed the scope of data collection to include Toyo Seikan Group Holdings and its consolidated subsidiaries from the data for fiscal 2019, including all overseas consolidated subsidiaries, which were previously excluded from the scope, and therefore the figures calculated with the new scope are not comparable to those calculated with the conventional scope.

Future actions

Based on the scenario analysis conducted in fiscal 2021, we plan to expand the scope of the analysis to other businesses in fiscal 2022 and to include all our businesses in fiscal 2023.

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FY2021

TCFD response (Level 1)

Conduct TCFD scenario analysis
(impact assessment of product liability for plastic and metal products).
Examine items to be disclosed based on TCFD scenario analysis results.

FY2022

TCFD response (Level 2)

Conduct scenario analysis regarding materials other than metal and plastic.

Glass and paper
Steel plate
Functional materials

FY2023

TCFD response (Level 3)

Conduct scenario analysis for all businesses.

Engineering, filling and logistics
Overseas

TNFD response

Gather information on specific risks and opportunities that are related to biodiversity loss.

Natural capital
Water risk

Our Commitment to Climate Change (Response to TCFD Recommendations)