We 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 (TSB) to help companies understand and disclose the financial impact of climate change on their business. In June 2017, the TCFD announced its recommendations on how companies should detail climate-related impacts in their financial reports. In accordance with the TCFD recommendations, we will evaluate and manage climate change-related risks and opportunities and disclose information appropriately.
We appoint a corporate officer in charge of the environment as the officer responsible for climate change issues. The officer serves as the chairperson of the Environmental Management Committee, which meets at least once a quarter to discuss climate change issues. The officer, who also serves as the chairperson of the CSR Committee and a member of the Management Meeting, presents a report at least once a half year on the results of the Environmental Management Committee’s activities to the CSR Committee and the Management Meeting for discussion. The results of discussions at the CSR Committee and the Management Meeting are reported by the officer at the Board of Directors’ meeting and shared with all directors more than once a year.
In FY2019, the TCFD Study Working Group was established, which considered issues related to the identification and evaluation of climate change-related risks/opportunities and countermeasures. The identified risks and opportunities are reviewed by the TCFD Working Group on a yearly basis. The TCFD Working Group, which is headed by the corporate officer in charge of the environment, is joined by the heads of major relevant departments (Finance and Corporate Strategy & Planning) and the head of Risk Management Office in order to integrate climate-related issues into our business strategy.
We also joined the TCFD Consortium, which is a platform for companies, financial institutions, etc. expressing support for the TCFD recommendations to discuss initiatives for effective disclosure of information and utilization of disclosed information for appropriate investment decisions by financial institutions. In FY2020, we participated in small-scale round table dialogue sessions with institutional investors hosted by the TCFD Consortium.
Analysis and evaluation of climate change-related risks and opportunities were performed using the 1.5°C and 4°C scenarios, under the leadership of the TCFD Study Working Group. In FY2020, we reviewed the amount of financial impact of physical risks*1 based on changes in our product structure, suppliers, etc. Meanwhile, the amount of financial impact of transition risks*2 was not revised since there were no specific changes in assumptions of calculation. Our analysis revealed no financially significant risks in both the 1.5°C and 4°C scenarios. We will continue to check trends in the international community and closely monitor the impact of risks and opportunities that may have a relatively material financial impact.
| Factor | Value chain |
Risk and impact |
Financial impact | Management approach |
||
|---|---|---|---|---|---|---|
| Society aiming for below 1.5°C |
Regulatory risk |
ONO | Increased carbon tax burden | Our burden of carbon tax levied on greenhouse gas emissions may increase due to the possible tightening of climate change-related regulations. | JPY 1.9 billion |
Mitigation ・Achieve the greenhouse gas emissions reduction target (Scope 1+2) in line with the 1.5°C target.・Implement energy saving and renewable energy investment plans to achieve the target. |
| Suppliers | Carbon tax passed on to procurement prices | Suppliers’ burden of the carbon tax levied on greenhouse gas emissions may increase due to the possible tightening of climate change-related regulations, and suppliers may pass on the carbon tax burden to us through higher procurement prices, potentially resulting in an increase in our materials costs. | JPY 0.6 billion |
Mitigation ・Achieve greenhouse gas emissions reduction target (Scope 3).・Strengthen engagement with suppliers to achieve the target. |
||
| If the temperature rises by 4°C |
Physical risk |
ONO, manufacturing contractors, suppliers |
Flood risk (acute) | Acute damage (flood) risk from typhoon, etc. may increase, and an interruption of operations caused by damage to production facilities or damage to storage facilities may potentially result in a decrease in revenue. | JPY 3.4 billion |
Adaptation ・Introduce emergency power generators at main bases and conduct periodic maintenance.・Integrate climate risks into enterprise risk management (ERM). ・Maintain a cooperation system with business partners (review of waterproofing measures by product storage service provider and business partners, etc.). ・Secure multiple suppliers. ・Consider the impact of flood due to climate change in the business partner selection process. |
| 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. | JPY 0 billion |
Adaptation ・Secure proper inventory to avoid loss of opportunities.・Maintain a cooperation system with business partners |
|||
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).
| Factor | Value chain |
Opportunity and impact | 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 (green sustainable chemistry *3 etc.) technology can be an opportunity to reduce raw material costs.
|
JPY 2.3 billion |
・Define indicators for assessing resource efficiency. ・Develop systems. |
| 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. | JPY 0.5 billion |
・Additional indications for existing pharmaceuticals. ・Enhance the new compound library. ・Make use of open innovation, etc. |
| 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. | (Contributing to the creation of corporate value) | Appropriately disclose the results of activities undertaken to the public. |
Analysis and evaluation were performed using the 1.5°C and 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])
The risk/opportunity identification process involves identifying potential risks and opportunities and analyzing each risk and opportunity in terms of the timing and probability of occurrence and the extent of the consequences. We determine the priorities for risks comprehensively by also evaluating risk mitigation measures. We prioritize and identify risks that would have a high impact on our business, those that have a high probability of occurrence, and those whose measures have high cost effectiveness. These risks are managed effectively by the Environment Management Committee. Regarding the identified risks, the Company-Wide Risk Management Committee discusses and develops measures and presents them to the Management Meeting for approval. The measures approved by the Management Meeting are communicated to the responsible persons at production sites and research institutes, who will then implement the measures at their respective organizations. The risks are thus managed in a systematic and comprehensive manner. The impacts of risks and opportunities are reviewed each year, and the risk and opportunity management status is reported to the CSR Committee and the Management Meeting.
We have created a road map to achieve the greenhouse gas emission reduction targets based on our medium- to long-term environmental vision. We discuss measures to be taken to achieve the targets and estimate the costs. Our medium- to long-term greenhouse gas reduction targets have been approved as science-based by the international initiative “Science Based Targets initiative (SBTi)*4.” For Scope 1+2, our targets are classified by SBTi as the strictest, “1.5°C target.” To achieve our medium- to long-term targets, we set a single-year target and evaluate the results (progress) against the target (FY2020 target: at least a 12.6% reduction compared to FY2017). We also calculate greenhouse gas emissions across the entire value chain (Scope 3). Since FY2014, we have calculated greenhouse gas emissions for our business sites in Japan by dividing Scope 3 emissions into 15 categories, in accordance with the guidelines of the Ministry of the Environment.
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.