Climate Change (TCFD)
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Climate change initiatives
Disclosure based on TCFD recommendations
In February 2022 the Group announced its support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). In addition to enhancing governance, we strive to improve the quality and quantity of disclosure based on an analysis of the risks and opportunities that climate change presents to Group businesses.
Governance
We have developed a governance structure centered on oversight by the Board of Directors and management by the Sustainability Promotion Committee to promote basic policies and priority topics concerning environmental issues as a whole, including climate change, in accordance with our Environmental Policy.
Climate change management structure
Chaired by the director in charge of President's Office, the Sustainability Promotion Committee's membership consists of Group company operating officers and other executives. The Committee meets quarterly to discuss risks and opportunities related to climate change, and submitted or reported to the Board, which oversees the company's activities.
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Activities under the climate change governance structure
- • Declaring support for the Task Force on Climate-related Financial Disclosures (TCFD) and disclosure based on its framework
- • Calculating GHG emissions
- • Implementing third-party verification
- • Acquiring Eco Action 21 certification of S-Pool Logistics, Inc.
Strategy
Scenario analysis
In implementing scenario analysis, the Group identifies important risks and opportunities related to climate change and assesses specific monetary amounts of their financial impact in the Sustainability Promotion Committee. This time, for the first time, we made use of scenario analysis that employed two scenarios (the 4℃ scenario and a combination of the 1.5℃ and 2℃ scenarios) to consider impacts in 2030 in two business areas we deem especially susceptible to the impacts of climate change: the Special Needs Employment Consulting Business (S-Pool Plus, Inc.) and the Logistics Outsourcing Business (S-Pool Logistics, Inc.).
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Special Needs Employment Consulting Business
The 4℃ scenario poses numerous physical risks mainly for farm operations, including acute disaster risks due to extreme weather events and chronic impacts including declining working conditions such as increased heat stroke risks due to higher temperatures and difficulty in temperature control of agricultural production leading to suspended operations. Under the 2℃ scenario, while we expect rising operation costs due to taxation policies for decarbonization and higher electricity prices, we expect growth in sales and corporate value as we provide services that reflect changes in customer behavior and our reputation. -
Logistics Outsourcing Business
For the 4℃ scenario, we reaffirmed the high physical risk of damage to Company logistics facilities and infrastructure due to intensifying abnormal weather events, resulting in the interruption of operations and rising costs of countermeasures and damages. Nevertheless, we also confirmed the possibility that this business could contribute to society by changing customer behavior in ways that increase use of e-commerce services and through systemic enhancements such as strengthening business continuity planning (BCP) measures. Other outcomes under the 2℃ scenario include the possibility of higher operating costs due to carbon pricing for decarbonization and opportunities for growth in corporate value by improving the environmental performance of packing materials, fixtures, and equipment.
These analyses and the study and implementation of response measures were conducted with reference to deliberations in the Sustainability Promotion Committee, in cooperation with Blue Dot Green Inc., the Group's environmental management consulting firm. We plan to make these analyses more precise by broadening their scope to include other business companies and through continual scenario analysis. We will also enhance resilience for future uncertainties by incorporating the results of deliberations in management strategies.
| Risks | Business impacts | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Category | Subcategory | Sub-subcategory | Timeline | Indictor | Topic: risks | Topic: opportunities | Assessment: risks | Assessment: opportunities | ||
| 4℃ | 1.5℃ | 4℃ | 1.5℃ | |||||||
| Migration | Policy/
regulatory |
Carbon pricing (carbon tax, emissions trading) |
Medium term - long term |
Revenues
Expenditures |
[Groupwide]
Rising costs related to electricity, fuel use, etc. at logistics facilities, farms, and other business sites due to carbon pricing |
[Groupwide]
Reducing operating, fuel, and other costs through investments to improve environmental performance; public assistance and tax cuts may apply for such measures. [Blue Dot Green Inc.]
Increased revenues through emissions credit trading |
Small | Medium | Small | Large |
| Responding to GHG emissions restrictions |
Short term - long term |
Revenues Expenditures |
[Groupwide]
Rising costs associated with measures to improve the environmental performance of logistics facilities, farms, and other facilities to meet stronger GHG reduction requirements |
[S-Pool Logistics, Inc.]
Sales growth through the provision of differentiated services using renewable energy |
Small | Large | Small | Medium | ||
| Plastic restrictions | Medium term - long term |
Revenues Expenditures |
[S-Pool Logistics, Inc.]
Growth in expenditures due to the cost of responding to regulations governing use of plastic and other packing materials |
[S-Pool Logistics, Inc.]
Sales growth achieved by using non-plastic packing materials to increase the number of companies hoping to use ethical logistics warehouses |
Small | Medium | Small | Medium | ||
| Information disclosure obligations |
Short term - Medium term |
Revenues Expenditures |
- |
[Blue Dot Green Inc.]
Increased demand for disclosure consulting services to meet corporate disclosure obligations |
- | - | Small | Large | ||
| Markets | Changing energy costs | Medium term - long term |
Revenues Expenditures |
[Groupwide]
Impact on use of temperature controls at farms and on logistics costs of rising energy costs (e.g., electricity, fossil fuels) |
- | Medium | Medium | - | - | |
| Reputation | Changing reputation among customers |
Short term - long term |
Revenues Expenditures |
[Groupwide]
As environmental awareness grows among customer companies, risk of declining revenue due to inability to shift to services and products with lower environmental impact |
[Groupwide]
New business opportunities through the provision of products and services with lower environmental impact as environmental awareness grows among customer companies |
Small | Large | Small | Large | |
| Changing reputation among investors |
Medium term - long term |
Revenues Expenditures Capital |
[Groupwide]
Falling stock prices or rising fundraising costs if investors determine that our initiatives are inadequate in light of their growing emphasis on environmental initiatives |
[Groupwide]
Rising stock prices or lower fundraising costs attributable not just to our own response to climate change, but to efforts to help clients respond to climate change through Blue Dot Green Inc. |
Small | Large | Small | Large | ||
| Physical | Acute | Intensification of abnormal weather events (e.g., typhoons, torrential downpours, mudslides, high tides) |
Short term - long term |
Revenues Expenditures |
[S-Pool Plus, Inc.]
Reduced earnings from rental farms for companies due to inability to resume operations following typhoons, earthquakes, torrential downpours, tornadoes, or similar events Increased expenditures due to rising casualty insurance premiums [S-Pool Logistics, Inc.]
Reduced earnings due to suspended operations at Company-operated warehouses or delays in shipping products due to service suspension by shipping companies following abnormal weather events [S-Pool Human Solutions, Inc.]
Reduced earnings due to suspended operations at client facilities due to damage following abnormal weather events |
- | Large | Small | - | - |
| Chronic | Worsening working and construction conditions |
Short term - long term |
Revenues Expenditures |
[S-Pool Plus, Inc.]
Lower productivity or higher hiring costs due to fewer applicants as rising temperatures lead to worsening working environments inside greenhouses |
[S-Pool Plus, Inc.]
Potential to achieve differentiation from the competition by providing services in urban areas based on indoor farms, which are less susceptible to climate change risks |
Large | Small | Medium | Small | |
Migration risks: Risks generated from reassessment of the financial value
of assets with high levels of GHG emissions, accompanied with migration to low-carbon economy
Physical risks: Direct impact such as property damage caused by flooding, heavy wind and rain,
and other weather conditions; indirect impact such as global supply chain disruptions and
resource depletion
Thinking of financial impact (small, medium, large): Relative impacts assessed through
quantitative and qualitative analysis
4℃ scenario: A scenario under which global mean temperatures by the end of this century
are
about 4℃ higher than before the industrial revolution due to the lack of progress on
measures to counter climate change. While this scenario poses high physical risks, including
intensification of abnormal weather events and rising sea levels, it also assumes no
additional restrictions on corporate and consumer behavior from current levels.
1.5℃ scenario: A scenario under which global mean temperatures by the end of this
century are
about 1.5℃ higher than before the industrial revolution due to active initiatives toward
achieving carbon neutrality. While this scenario envisions a controlled increase in physical
risks, it also assumes stronger restrictions on corporate and consumer behavior through means
such as taxation policies, laws, and regulations.
Business impact assessment
In financial impact assessments based on scenario analysis, for items for which estimates are possible based on climate change scenarios and other information, we established a mathematical model and estimated the anticipated impact on revenues as of 2030 for each item. For the foreseeable impact of direct flood damage and indirect damage such as business suspension, we estimated as physical risks the impact of water damage (e.g., acute typhoon damage) not just under the 4℃ increase scenario, but for 1.5℃ or less. For migration risks (in the 1.5℃ scenario in particular), we forecast increases in energy-related costs, the impact of introducing carbon taxes and various other systems, and the impact of higher electricity procurement costs of renewable energy. Based on these analyses, we examine and formulate specific countermeasures for each business to prepare for future uncertainties. We will seek to review these assessments and enhance the quality and quantity of the information we disclose through periodic analysis based on various future developments.
Incorporating risks and opportunities into strategies
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Centered on Blue Dot Green Inc., we help find solutions to environmental issues through the proactive deployment of business activities in the environmental domain. Given the trend toward legislation to make it obligatory to reduce CO2 emissions, our medium-term management plan will develop new revenue foundations in the environmental field through new CO2 reduction program services. We also calculate Groupwide emissions and promote efforts to reduce emissions. -
At Work Happiness Farms, in the face of weather anomalies exacerbated by climate change, we are considering countermeasures to fierce heatwaves and large-scale typhoons. To counter heatwaves, we are making continual environmental improvements, including modifying layouts to set up shaded spaces.
We are countering typhoons by installing windbreak fences that reduce damage, especially at farms that have suffered severe wind damage in the past. To realize further stability improvements in farm operations, we have opened indoor farms less exposed to the risks of climate change. We plan to establish a sustainable business structure through ongoing response to weather anomalies and by steadily opening additional indoor farms. -
S-Pool Logistics, Inc. is advancing environmental management for net zero CO2 emissions to mitigate climate change. In December 2020, to reduce our environmental impact through autonomous environmental initiatives, we joined the “RE Action—Declaring 100% Renewable” program. We're cutting CO2 emissions by steadily switching to renewable energy sources and reducing labor needs through automation. As a new initiative, we plan to open an eco-friendly zero-emissions warehouse to help realize carbon neutrality. This is intended to achieve the goal of zero CO2 emissions. At the same time, seeing the expanding movement toward CO2 reductions as an opportunity, we're working to secure new customers among companies promoting their own climate change initiatives. We're striving to develop structures for sustained business operations through investments with an eye toward progress in automation technologies. We will seek to minimize the impact of events such as disruptions in logistics networks resulting from natural disasters by securing employee safety, assuring cargo security, and sharing information on delivery conditions with our customers.
Specific initiatives
We pursue the following initiatives to reduce greenhouse gas emissions and energy consumption and to improve efficiency.
| Category | Initiatives |
|---|---|
| Mitigation |
[All companies]
[S-Pool, Inc.]
|
| Adaptation |
|
Risk management (structure and processes)
In addition to gathering and analyzing information on issues such as societal developments and
market environments to swiftly identify business risks, we hold quarterly meetings of the Risk
Management Committee to allow swift, appropriate response to risks when they occur.
In the area of climate change risks, we identify applicable laws and regulations as well as the
vulnerabilities of our farms and warehouses in the event of natural disasters, including typhoons,
torrential rain, and water shortages, regarded to pose major impacts on our businesses. We analyze
and assess these issues alongside risks related to our business activities, including risks of
climate change, from two perspectives: priority in corporate management and social importance.
Details of assessments by the Risk Management Committee are reported to the Board of Directors,
which deliberates and makes final decisions on materiality (material issues). Once finalized, the
material issues are subject to confirmation of progress and reviews of current conditions by the
Board of Directors, as well as suitable risk management, in this way building, maintaining, and
strengthening the Groupwide risk management structure.
Indicators and targets
Our Groupwide GHG emissions reductions targets call for reducing Scope 2 emissions by 10% by 2025,
reducing Scope 1 and Scope 2 emissions by 25% by 2030, and achieving carbon neutrality in both
Scope 1 and Scope 2 emissions by 2050. The fiscal period ended November 2021 is used as the base
year (*) for all targets.
Our targets for emissions intensity per unit of operating profit for Scope 1 and Scope 2 emissions
call for achieving reductions of 30% by 2030 and 60% by 2050.
* In light of domestic and international trends, the base year has been revised to the fiscal
period ended November 2021. Reduction targets have been revised upward.
* The scope of targets is identical to the scope of calculations of greenhouse gas emissions
provided below.
We have set a target of 40% of electricity consumed in Group business activities from renewable energy by 2030 and 100% by 2050. We're concurrently making progress on reducing annual electricity use by 2% each year. As a first step toward these goals, in December 2020, S-Pool Logistics, Inc. joined the “RE Action—Declaring 100% Renewable” program.
Main environmental activities
Eco Action 21 is an independent certification and registration program established by the
Ministry of the Environment of Japan to help realize a sustainable economy and society based
on corporate environmental initiatives.
S-Pool Logistics, Inc. earned Eco Action 21 certification in August 2021 (*1). It is striving to build the foundations of environmental
management by enhancing its management structures and raising employee awareness, as well as
by implementing countermeasures to climate change and global warming and reducing
CO2 emissions.
*1 Subject facility: Shinagawa Center
Participation and support of industry organizations, initiatives, etc.
The S-Pool Group participates in and supports the following industry organizations and initiatives to promote initiatives to address climate change.
In March 2022, we announced our support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Future plans call for continuing to incorporate initiatives to address climate change in our business strategies and disclosing information based on TCFD recommendations.
In February 2021, we participated in the Japan Climate Initiative. Through this initiative, we will proactively work to achieve a low-carbon society.
We support the national COOL CHOICE initiative, which promotes smart choices to counter global warming. We are registered as a corporate supporter of this initiative.
S-Pool Logistics is a participant in RE Action – Declaring 100% Renewable, declaring its intent and taking actions to convert to 100% electricity from renewable energy sources.
We review our participation in and support for industry associations regularly for any major conflicts in thinking between the industry associations and the Company, with consideration for consistency with our business objectives, priority areas, and business activities. We consider withdrawal of our participation and support if any major deviations have been identified.