ONO expressed our support in October 2019 for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)(click here for details). The TCFD is a task force established by the Financial Stability Board (FSB) to help companies understand and disclose the financial impact of climate change on their businesses. In June 2017, the TCFD announced its recommendations on how companies should disclose information. Based on the TCFD recommendations, we will evaluate and manage climate change-related risks and opportunities and disclose information appropriately.
ONO believes that action on global environment issues, including climate change, is one of the most important business challenges.
We appointed a president, representative director, and CEO as the chief executive officer for environmental management, and also appointed a member of the board of directors, Senior Executive Officer/ Executive Director, Corporate Strategy & Planning as the Chief Environmental Officer.
Major issues related to sustainability strategy, including measures against climate change, are discussed in the Sustainability Strategy Meeting that was newly established in FY2022. The Sustainability Strategy Meeting is chaired by the Chief Environmental Officer and many members of the Executive Committee, including the president and representative director, participate in the meeting. Details of discussions and decisions at the Sustainability Strategy Meeting are reported to the board of directors every six months or more often and members of the board of directors supervise the execution of the decisions.
In addition, as the executive officer in charge of sustainability, the Chief Environmental Officer chairs the Environment Management Committee, which manages and promotes the overall environmental activities of the company, and the Sustainability Promotion Committee, which discusses major issues related to the sustainability activities at each worksite level and raises issues at the Sustainability Strategy Meeting.
As mentioned above, we have a system where our activities for climate change are constantly supervised from the worksite level by the Chief Environmental Officer (member of the board of directors, Senior Executive Officer/ Executive Director) and by the board of directors.
We have positioned "protection of the global environment" as one of the important issues (materiality) for achieving medium- to long-term improvement of corporate value. We also include "Activities for materiality" and "Introduction status of ESG indicators" in the performance indicators of performance-based stock compensation for members of the board of directors (excluding outside board members) and executive officers. In this way, we can facilitate an increased awareness of environmental issues and promote sustainability management.
In FY2019, we established the TCFD Study Working Group, headed by the Chief Environmental Officer, to identify risks and opportunities related to climate change, assess their financial impact, and consider how to respond. In addition to the Chief Environmental Officer, we have also added the heads of related major departments (Finance and Corporate Planning) and the head of the Risk Management Office as members of the TCFD Study Working Group, who all work on tackling climate-related issues as part of our management strategy. The financial impact of the identified risks and opportunities is reviewed annually by the group. Furthermore, mitigation and adaptation measures against the identified risks, and measures for promoting opportunities will be discussed by the Environment Management Committee. The content of discussions held at the Environment Management Committee is supervised by the board of directors through the above-mentioned environmental management system.
Analysis and evaluation of climate change-related risks and opportunities were performed using the 1.5°C and 4°C scenarios from a short-term (up to 3 years), medium-term (3-10 years) and long-term (10-30 years) perspective, under the leadership of the TCFD Study Working Group. Continuing from our efforts in FY2020, in FY2021, we reviewed the amount of financial impact of physical risks*1 based on changes in our product structure, suppliers, etc., and confirmed the status of our response to recognized risks. We also confirmed that there is no high risk of climate change in overseas product inventories and investigational product inventories. In FY2022, thanks to correction of the locations that are recognized to have flood risks (changed storage locations from a lower to higher position), the amount of financial impact has been drastically decreased. Concerning the amount of financial impact from transfer risks,*2 it was partially revised by conforming it to the value of greenhouse gas emission amounts in the case of taking no measures, which was pending when new medium- to long-term environmental targets were established. The results of the analysis have been reported to committees, including the Environment Management Committee, Sustainability Promotion Committee, etc., and it has been confirmed that these issues will not be major financial issues for us in any case. The management status of identified risks and opportunities are being monitored (for the results of the analysis, please see "Risks and opportunities related to climate change, as well as financial and business impacts” in the table below). We will continue to check trends in the international community and closely monitor the impact of risks and opportunities that may have a relatively significant financial impact.
The impact of the scenario we assumed to ONO is as follows:
| Factor | Target | Risk and impact |
Affected period | Financial impact | Management approach |
||
|---|---|---|---|---|---|---|---|
| Society aiming for below 1.5°C |
Regulatory risk |
ONO | Increased carbon tax burden | If carbon prices rise due to regulations on climate change being tightened, and if high growth is achieved and energy consumption, etc., increases, then the burden of carbon tax on greenhouse gas emissions may increase. | Medium- to long-term | JPY 1.6 billion |
Mitigation
|
| Suppliers | Carbon tax passed on to procurement prices | If carbon prices rise due to regulations on climate change being tightened, the carbon tax burden on the greenhouse gas emissions of suppliers will increase, and if the tax increase is passed on to our procurement prices, costs may rise. | Medium- to long-term | JPY 0.6 billion |
Mitigation
|
||
| If the temperature rises by 4°C |
Physical risk |
ONO, manufacturing contractors, suppliers |
Flood risk (acute) | Acute damage (flood) risk from typhoons, etc., will increase, and there is a possibility that profits will decline due to interrupted operations from damage to manufacturing equipment, damage to storage facilities for raw materials and products, or flooding. | Short- to medium-term | JPY 0.3 billion |
Adaptation
|
| Water shortage risk (chronic) | Since sufficient inventory is maintained, it is not likely at present that water-use restrictions due to long-term depletion of water resources will cause an interruption of our operations, resulting in a decrease in revenue. | Medium- to long-term | JPY 0 billion |
Adaptation
|
|||
Mitigationmeasures to reduce emissions of greenhouse gases that cause climate change, Adaptationmeasures to prevent or mitigate damage caused by the effects of climate change that have already occurred (or are expected to occur in the future).
Short-term: Up to 3 years; Medium-term: 3-10 years; Long-term: 10-30 years
| Factor | Target | Opportunity and impact | Affected period | Financial impact |
Management approach | ||
|---|---|---|---|---|---|---|---|
| Society aiming for below 1.5°C |
Opportunity from resource efficiency |
ONO | High-efficiency pharmaceutical manufacturing process | Introduction of high-efficiency pharmaceutical process technologies , such as process design and continuous manufacturing system, etc., that takes into account green sustainable chemistry* can provide opportunities to reduce energy and raw material costs.
|
Medium- to long-term | JPY 2.3 billion |
|
| If the temperature rises by 4°C |
Business opportunity | Customers | Preventive/treatment products | If disease trends change due to global warming, demand for existing drugs (for melanoma, etc.) may increase, or the development and sales of new drugs may have a favorable impact on revenue. | Medium- to long-term | JPY 0.5 billion |
|
| Society aiming for below 1.5°C |
Reputation opportunity | Investors, customers, recruitment market | Corporate value improvement | It is possible that our efforts to tackle climate change will help us earn customer trust, retain employees, improve our reputation in the recruitment market, and improve ESG investors’ evaluation of our performance, thus contributing to the creation of corporate value. | Short- to medium-term | (Contributing to the creation of corporate value) | Appropriately disclose the results of activities undertaken to the public. |
The TCFD Study Working Group selected, analyzed and evaluated the 1.5°C and the 4°C scenarios in which progress toward a decarbonized society and intensification of global warming are projected, respectively.
[Concept of climate change scenarios]
(Prepared by ONO based [Global average surface temperature change] of “Climate Change 2013: The Physical Science Basis – Summary for Policymakers” [IPCC, 2013, page 19])
| Scenario | Name of key scenario | Social changes | ONO’s situation |
|---|---|---|---|
| 4℃ (unclear decarbonization policy) |
RCP8.5 scenario, Stated Policies Scenario, etc. |
|
|
| 1.5℃ (strengthened decarbonization policy) | Sustainable development scenario, External data unique to Japan, etc. |
|
|
We comprehensively refer to scenarios and use them with different temperature zones as much as possible as a basis for our own scenarios in order to eliminate unexpected variables.
| Name & characteristics | World Energy Outlook (WEO) published by International Energy Agency (IEA) | Description | Main viewpoints used at ONO | |
|---|---|---|---|---|
 |
RCP 8.5 |
CPS (Current Policies Scenario) | Pessimistic scenario (SSP3 RCP8.5) (Aqueduct Water Risk Atlas tool) |
|
| RCP 6.0 |
Stated Policies Scenario (STEPS) | STEPS scenario (IEA) |
|
|
| RCP 4.5 |
- | - | - | |
| RCP 3.4 |
- | - | - | |
| RCP 2.6 |
Sustainable Development Scenario (SDS) | Carbon price in developed countries: USD100/t-CO2 by 2030, IEA SDS scenario) |
|
|
| RCP 1.9 |
- | - | (ONO’s scenario is currently being verified) | |
| Other | External data unique to Japan | Ministry of Land, Infrastructure, Transport and Tourism’s hazard map and manual for economic evaluation of flood control investment | Used as a domestic scenario where our main offices are located. |
The scope of analysis includes our domestic plants and contract manufacturers, suppliers, investors, customers, recruitment, etc. at home and abroad. The target period and area are FY2020-2030 and the pharmaceutical manufacturing industry, which is our major business, respectively.
We identify risks and opportunities where climate change has an impact on finance, analyze and evaluate the timing and probability of occurrence and the range of impact, and thereby determine the priority of each countermeasure. We place priority on handling risks that have a large impact on business and risks with a high probability of occurrence, and on engaging in measures that are highly cost-effective, and their progress is managed by the Environment Management Committee.
The Company-Wide Risk Management Committee considers measures for risk mitigation and adaptation when it comes to identified risks, and then proposes them to the Sustainability Strategy Meeting or Executive Committee for approval. The heads of production sites and research institutes, etc. carry out the approved measures, and comprehensively manage risks associated with climate change, including flood risks. The progress of these measures is presented at the Environment Management Committee, Sustainability Promotion Committee, and other meetings.
In addition, the amount of financial impact of the identified risks and opportunities is reviewed annually by the TCFD Study Working Group. Mitigation and adaptation measures for identified risks and measures to promote opportunities are also discussed by the TCFD Study Working Group and the Environment Management Committee. The content of discussions held at the Environment Management Committee is supervised by the board of directors through the environment management system (described in “Governance” above).
We have established and been monitoring medium- to long-term targets and annual targets with the aim of minimizing risks and maximizing opportunities associated with climate change. Concerning the transfer risk, we have established ambitious targets from an early stage, such as setting a goal of zero emissions (Scope 1+2) at ONO by FY2050, which was approved by SBTi* in October 2019 as a 1.5°C target, the highest level at that time. In FY2022, we reviewed our targets and have set the new goal of achieving carbon neutrality (virtually zero due to carbon offsets) for our own emissions (Scope 1+2) by FY2025, and we are moving forward the target date for achieving zero greenhouse gas emissions from FY2050 to FY2035.
Greenhouse gas emissions (Scope 3) in our supply chain are calculated with our business sites in Japan in accordance with the guidelines of the Ministry of the Environment. We started joint transportation of ethical pharmaceuticals in Japan starting in January 2023 and have also been engaging in CO2 emission reduction by establishing efficient transportation systems.
As for water risks, we conduct risk assessment once a year. Recognizing water risks as “disaster/climate change risks” among the company-wide risks, we implement measures based on our business continuity plan (BCP), including maintaining a proper stock. In the future, we will also work to establish a collaborative relationship with our business partners, to secure multiple suppliers, and to consider the impact of flood/shortage of water due to climate change in our business partner selection process.
In order to appropriately disclose information based on the TCFD recommendations, it is important to understand the concerns and issues of external stakeholders regarding TCFD disclosure. As part of this effort, we participate in the TCFD Consortium, a forum for companies, financial institutions and other organizations who support the TCFD recommendations to discuss effective information disclosure and appropriate initiatives. Furthermore, In March of FY2022, we held an ESG briefing for institutional investors, which we have been conducting continuously since FY2019, and received various opinions and questions. These efforts by us to respond to the TCFD recommendations were published as advanced cases in the Ministry of the Environment’s “Climate Change Adaptation Guide for Private Sector -Preparing for Climate Risk and Surviving- (revised edition, March 2022).” We believe that deepening our understanding of TCFD disclosure through such dialogues with stakeholders and collaborations with the government will allow us to help promote responses to climate change in society as a whole.
“Climate Change Adaptation Guide for Private Sector -Preparing for Climate Risk and Surviving- (revised edition, March 2022),” Ministry of the Environment