Sustainability

Disclosure based on Recommendations of the TCFD

1.Introduction

When our founder Fusajiro Kanematsu established the Company in 1889, he personally laid down the following corporate principle: "Let us sow and nurture the seeds of global prosperity." These words represent Fusajiro's intention to sow the seeds (i.e., create businesses) to achieve prosperity of Japan and happiness through economic development. In a modern context, this corporate philosophy expresses our commitment to help achieve prosperity and happiness for people not only in Japan but all over of the world, which is similar to the ideas underlying the Sustainable Development Goals (SDGs).

In relation to SDG 13, Climate Action, we have selected and focused on particular businesses and promoted initiatives since our inception to create a business portfolio that does not include thermal power generation, coal, and other carbon-intensive businesses. In addition, all projects--investments, important contracts, significant asset purchases--are implemented in line with the Group's sustainability policy and key issues (materiality). We have thus developed a governance system for management and monitoring to ensure that our Group does not engage in carbon-intensive businesses.

Thanks to these extensive efforts to control our environmental impact, CO₂ emissions (Scope 1, 2) from Group operations are extremely small relative to our size. We will maintain the current governance system to ensure that our emissions do no increase going forward. Furthermore, our Group has actively engaged in a forest conservation project and Joint Crediting Mechanism (JCM) project in recent years. Through these projects, we plan to offset all our CO₂ emissions with credits generated by our Group or avoided emissions to be converted into credits (become carbon neutral*1) as soon as possible and eventually aim to become carbon negative*2 so that we can keep on contributing to Japan and the international community.

*1 Carbon neutral is a state where the CO₂emissions (Scope 1, 2) of our Company and Group are balanced with the credits generated by our Group through the forest conservation project and JCM project or avoided emissions.

*2 Carbon negative is a state where the credits generated by our Company and Group through the forest conservation project and JCM project or avoided emissions exceed(s) the CO₂ emissions (Scope 1, 2) of our Group.

2.Executive Summary

In June 2021, our Company pledged its support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). We will strive to disclose information regarding climate change-related business risks and opportunities in accordance with the TCFD's framework and in a more accessible manner.

ItemsTCFD recommended disclosure items (11 items)Our initiatives (summary)

Governance

Describe the board's oversight of climate-related risks and opportunities

< Monitoring organization >

Board of Directors

Describe management's role in assessing and managing climate-related risks and opportunities

< Role of management >

Discussion and reporting in the Sustainability Management Committee meeting attended by the Chief Officer of Corporate Planning and mainly chief officers from business divisions (executive officers)

Strategy

Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term

< Risks and opportunities >

  • Selected the North American beef business and steel tubing business for the scenario analysis on the basis of climate-related impacts (qualitative aspect) and sales/profit (quantitative aspect)
  • The top priority areas in each of the businesses are as follows

● North American beef business (short-, medium-, and long-term, 4℃ scenario and below 2℃ scenario)

  • Risk: Rise in feed and pasture prices due to higher average temperature (physical risk)
  • Opportunity: New opportunities associated with the development/adoption of new technologies (plant-based meat)

●Steel tubing business (short-, medium-, and long-term, 4℃ scenario and below 2℃ scenario)

  • Risk: Decline in fossil fuel demand (transition risk)
  • Opportunity: New opportunities associated with the development/adoption of new technologies (CCUS, EOR)

Describe the impact of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning

< Impacts >

Categorize into Large/Medium/Small

Describe the resilience of the organization's strategy, taking into consideration different climate-related scenarios, including a 2℃ or lower scenario

< Analysis results >

  • Potential risks and opportunities exist for both the North American beef business and steel tubing business
  • On the basis of the analysis, we should formulate a business strategy that focuses on climate change-related opportunities
  • Promote investment in environment-related business areas as a priority measure under our medium-term vision, future135

Risk management

Describe the organization's processes for identifying and assessing climate-related risks

< Identification and evaluation >

Each business division

Describe the organization's processes for managing climate-related risks

< Management >

Sustainability Management Committee

Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization's overall risk management

< Integration (reporting, monitoring and supervision) >

Each business division → Sustainability Management Committee → Board of Directors

Metrics and Targets

Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process 

< Indicator >

CO₂ emissions

Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and the related risks

< GHG emissions >

FY2021  29,497t-CO₂ (95 companies from Kanematsu Group)
(Assured: Scope 1: 9,772t-CO₂ / Scope 2: 19,725t-CO₂)
FY2020  27,800t-CO₂ (94 companies from Kanematsu Group)
(Estimates: Scope 1: 9,200t-CO₂ / Scope 2: 18,600t-CO₂)

Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets

< Goals and results >

  • 2025 Carbon neutral
  • 2030 Carbon negative (minus) 150,000t-CO₂
  • 2050 Carbon negative (minus) 1,000,000t-CO₂

3.Disclosure based on the TCFD recommendation

① Governance/Risk management

< Execution >

Our Group's business operations are promoted and executed by six business divisions, which are also responsible for identifying and evaluating climate-related risks in their respective business areas.

< Management >

Our Company's Sustainability Management Committee is made up of mainly chief officers (executive officers) of our business divisions, which are executive organizations, who are well versed in their respective businesses, and the Chief Officer of Corporate Planning (executive officer) who oversees our Group's basic management policy and strategy and the distribution of management resources and who also serves as the committee chair. The Sustainability Management Committee discusses the climate-related risks that are identified and evaluated by the sales divisions. It is also responsible for calculating our Group's CO₂ emissions on a regular basis, as well as discussing the factors contributing to increase or decrease of emissions and measures for improvement to ensure comprehensive risk management.

< Monitoring and supervision >

The Board of Directors receives regular reports from the Sustainability Management Committee and monitors and supervises the comprehensive management of climate-related risks in our Group.

Sustainability Management Committee agendas for FY2021
  • Revision and identification of new materiality (key issues)
  • Support for the TCFD
  • Selection of businesses for TCFD scenario analysis
  • Calculation of CO₂ emissions
  • Report on TCFD scenario analysis progress

(2) Strategy

< Basic idea >

We have conducted a scenario analysis on the businesses in our Group that are considered to be significantly impacted by climate change. As a result of the analysis, we believe that even though both risks and opportunities exist in all the scenarios, the impact from opportunities surpasses that from risks.

Since the promotion of investment in environment-related business areas is one of the priorities under our medium-term vision, future135,we consider addressing climate change to be a business opportunity.

< Selection of businesses for scenario analysis >

To evaluate the qualitative impact of climate change on our Group's businesses, we first classified them into high-risk sectors and non-high-risk sectors as per the TCFD recommendations.

Next, we categorized the impact to our Group from the perspective of sales (quantitative aspect). Of the four businesses that showed a large qualitative impact and quantitative impact, we selected the North American beef business and steel tubing business, which account for a relatively large portion of our sales on a consolidated basis (IFRS earnings), for the scenario analysis.

< Selection of climate scenarios >

In order to objectively determine the new risks and opportunities brought about by climate change and the resilience of the businesses under review, we used reports by the International Energy Agency (World Energy Outlook 2021, Net Zero by 2050 Roadmap for the Global Energy Sector), the IPCC Fifth Assessment Report, and other reference documents to conduct the analysis for 2030 and 2050 assuming the following scenarios:

(i) 4℃ scenarios (current scenarios)

  • Stated Policies Scenario (STEPS)

    Scenario in which policies that have already been introduced or announced are implemented

  • - Announced Pledges Scenario (APS)

    Scenario in which the pledges announced by the world's governments are completely achieved as scheduled

  • Business-as-usual (BAU)

    Scenario in which fossil fuels continue to be the main source of energy, and greenhouse gas emissions keep increasing

(ii) Below 2℃ scenarios (transition scenarios)

  • Sustainable Development Scenario (SDS)

    Scenario in which all net-zero pledges are completely achieved, and broad efforts are made for the short-term reduction of emissions (i.e., scenario that matches the Paris Agreement's goal to limit global warming to well below 2℃)

  • Net Zero Emissions (NZE) by 2050 Scenario

    Scenario in which the global energy sector achieves CO₂net zero by 2050

  • Toward Sustainability Scenario (TSS)

    Scenario in which progress is made toward achieving the SDGs on a global scale, and the world's energy demand is satisfied by renewable resources

< Impacts of climate-related risks and opportunities >

The (financial) impacts of climate-related risks and opportunities do not apply to the whole Company but are impacts on the profits or expenses of the businesses selected for the scenario analysis. The impacts are classified into three categories (Large, Medium, Small) on the basis of the following quantitative criteria:

(Quantitative criteria)

  • Large: 1 billion yen or more
  • Medium: 500 million yen or more to less than 1 billion yen
  • Small: less than 500 million yen
  • ―: Qualitative evaluation only

< Scenario analysis and strategy resilience >

(1) North American beef business

Opportunities: There are no direct climate change-related impacts. However, demand for beef is expected to grow due to population increase in all scenarios.

Risks: The average temperature during the summer season is expected to rise in North American corn production regions.

(2)Steel tubing business

Risks: Fossil fuel demand is expected to decline significantly in the below 2℃ scenarios.

Opportunities: The amount of captured CO₂ is expected to increase due to CCUS.

(3) Metrics and Targets

< Metrics > CO₂ emissions

As our Group does not own many plants and generates little greenhouse gas emissions other than CO₂, we used CO₂ emissions as the indicator for evaluating the climate-related risks and opportunities.

< Results >

(FY2020) 27,800t-CO₂
(Estimates
 Scope1:9,200t-CO₂ 
 Scope2 : 18,600t-CO₂ 
94 companies reviewed

< Targets >

(Targets for Scope 1, 2)

  • 2025 Achieve carbon neutrality
  • 2030 Carbon negative (minus) 150,000 t-CO₂
    (△) 150,000 t-CO₂
  • 2050 Carbon negative (minus) 1,000,000 t-CO₂
    (△) 1,000,000 t-CO₂

(Targets for Scope 1, 2 and Scope 3)

They will be set separately.

First, we will aim to achieve carbon neutrality as soon as possible, by 2025. We will reduce CO₂ emissions by shifting to renewables; for any remaining emissions that cannot be reduced, we will offset them with the credits generated from our business--converting our contribution to GHG emissions reduction in the REDD+ project, etc. into credits--to achieve carbon neutrality.

We will keep expanding our clean fuel and renewable energy business, REDD+ project, and JCM project to increase avoided emissions, aiming to become carbon negative at −150,000 t-CO₂ and −1,000,000 t-CO₂ by 2030 and 2050, respectively, thereby contributing to GHG emissions reduction on a global scale.

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