Information Disclosure Based on TCFD Recommendations
Outline of TCFD Response
Climate change is a global challenge for all countries and regions, and the reduction of greenhouse gases is a global long-term target. The Nisshinbo Group believes that it is crucial to incorporate business opportunities caused by climate change and appropriately respond to risks. Accordingly, in FY2021 the Group began analyzing climate change scenarios in accordance with the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD). In June 2022, the company expressed its agreement to the TCFD recommendations.
Through climate change scenario analyses, the Group will identify the risks and opportunities that climate change may pose to the business in future, develop more flexible and robust strategies by leveraging the opportunities in the development of business strategies, and increase the resilience against future risks.
TCFD Disclosure Item
Governance
As shown in the diagram below, the Nisshinbo Group established and operates a framework for appropriately responding to risks and opportunities related to climate change. In order to make risk an opportunity for sustainable growth, the Group will constantly identify and analyze changes in the various business environments. Based on the business policies derived from the Group's corporate philosophy, the Nisshinbo Group will create new growth opportunities by contributing to society as an Environment and Energy Company group. Responsibilities for climate-related issues are borne by such meetings as the Board of Management, which is composed of the president and executive officers, and reports to the Board of Directors. The Board of Directors discusses responses to the reported climate-related issues and oversees goals and the progress made.
Governance Structure
Strategy
An Overview
The Nisshinbo Group is involved in a wide range of businesses; consequently, the following steps were taken to analyze climate-change scenarios. The first step was for the Solutions business in the Wireless and Communications business, the Automobile Brakes business, and the Chemicals business where risks and opportunities are expected to have a significant impact. In FY2022, the Group completed an analysis of its major businesses with production activities by targeting the Marine System, ICT/Mechanics, and Mobility business in the Wireless and Communications business, the Micro Devices business, the Precision Instruments business, and the Textiles business. The climate change scenarios used are for a world where warming progresses (warming progression scenario, 2.5°C to 4°C) and a world where warming is controlled and active transitions occur (decarbonization scenario, 1.5°C to 2°C).
1. Assess Materiality of Climate-related Risks
As the first step in the scenario-analysis, the Nisshinbo Group identified the material risks and opportunities for each of the targeted businesses with reference to the external literature related to TCFD Final Report and industries. Because the impacts of climate change have the potential to materialize over the medium to long term, the Group qualitatively assessed the risks and opportunities on a large, medium, and small basis, not only in the short term but also over the medium to long-term time horizon up to 2050. As a consequence, the following table shows the significant risks and opportunities associated with business continuity and the creation of new businesses.
:Wireless and Communications | :Micro Devices | :Brakes |
:Precision Instruments | :Chemicals | :Textiles |
Risk Type | Assessment Item | Risks | Opportunities | |
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Category | ||||
Transition Risks | Policy and Legal | Carbon price |
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Market and Technology Shifts | Energy mix |
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Customer and market changes |
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Spread of low-carbon and energy-saving technologies |
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Physical Risks | Chronic | Average temperature rise, and change in precipitation and weather patterns |
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Acute | Severity of extreme weather events |
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2. Identify and Define Range of Scenarios
The Nisshinbo Group analyzed climate-related risks and opportunities under the warming progression and decarbonization scenarios using 2050 years as the time axis. For the analysis, see the following literature.
International Energy Agency (IEA) | Intergovernmental Panel on Climate Change(IPCC) | |
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Warming Progression Scenario | ・Stated Policies Scenario (STEPS) ・Reference Technology Scenario (RTS) |
・RCP8.5 |
Decarbonization Scenario | ・Net-Zero Emissions Scenario (NZE) ・Sustainable Development Scenario (SDS) |
・RCP2.6 or RCP4.5 |
*IEA scenarios are based on the latest data available at the time of analysis of each project, and there may be slight differences in conditions and other factors.
The Nisshinbo Group organized the global view of the warming progression scenario and the decarbonization
scenario.
In the warming progressive scenario, while some sites will be affected by flooding and other damage, sales
opportunities for countermeasure products as temperatures rise will increase, and demand for disaster
prevention-related products and services is expected to rise. In the decarbonization scenario, countries will
tighten emission reduction targets and introduce high carbon taxes, while demand for decarbonization-related
products and environmentally friendly products, especially EVs/renewable energy, is expected to increase. Each
image looks like the following:
*1 xEV: Electric Vehicle (electric cars)
*2 ZEH/ZEH: Net Zero Energy House / Net Zero Energy House
3. Evaluate Business Impacts
In the scenario analysis, the Group evaluated the financial impact of each business.
In Solutions Business in the Wireless and Communication business, although there are differences in scale
perceptions, demand for disaster prevention products and services is expected to grow in all possible scenarios
in line with the increase in damage from natural disasters, such as floods. In the Marine System, ICT/Mechanics,
and Mobility business, demand for EV and ship-related products is expected to increase in both scenarios,
although there are differences in scale perceptions.
In the Micro Devices business, demand for EV-related products is expected to expand under both scenarios, and demand for water level gauge sensors is expected to increase in response to flood damage. In addition, under the decarbonization scenario, the response to the reduction of carbon tax costs will become an important issue in the future.
In both scenarios, the Automobile Brakes business is expected to increase demand for friction materials for brake assemblies with increasing demand for motor vehicles, but in the decarbonization scenario, the increase in demand for friction materials for braking replacements is expected to be limited by the prolongation of friction materials due to the widespread use of EVs. In addition, the scenario contains increased risks because future carbon regulations will be a factor in the reduction of benefits; therefore, decarbonization-related responses will be an important issue in the future.
In the Precision Instruments business, demand for wind power generation-related components and machine tools for CFRP materials is expected to increase under both scenarios. In addition, under the decarbonization scenario, a response will be required in order to reduce carbon tax costs.
In the Chemicals business, increased sales of separators are expected to provide potentially significant opportunities in both scenarios from the proliferation of fuel cells. In addition, in the decarbonization scenario, the popularization of ZEB/ZEH is expected to increase the demand for insulation materials for building materials, increase the demand for additives as demand for bioplastics expand, and the demand for cross-linking agents will also increase from the expanded use of cold-drying paints.
In the Textiles business, the decarbonization scenario will require measures to address the significant impact of carbon taxes, while demand for environmentally friendly products is expected to grow, requiring the capture of demand for industrial materials and environmentally oriented apparel.
:Wireless and Communications | :Micro Devices | :Brakes |
:Precision Instruments | :Chemicals | :Textiles |
Category | Assessment Item | Assessment of Impacts* | |
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Warming Progression Scenario | Decarbonization Scenario | ||
Carbon price |
Increased cost of procuring raw materials from suppliers and manufacturing costs at factories
due to carbon taxation
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Energy mix |
Increase or decrease in energy costs due to fluctuations in city gas/crude oil/electricity
prices
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Customer and market changes |
Increase in sales for related products due to increased demand for marine transportation as a
result of modal shift
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Increase in energy costs due to response to GHG reduction requests from customers
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Increase in sales of brake friction materials due to change in demand for automobiles
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Increase in sales of insulation materials due to the popularization of ZEB/ZEH
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Increase in sales of cross-linking agents due to rising demand for cold-drying paints
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Increase in sales of machine tools for CFRP materials due to an increase in the number of
companies working to reduce GHG emissions
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Expand sales of products for environment-oriented apparel and environmentally friendly
industrial materials
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Spread of low-carbon and energy-saving technologies |
Increase in sales for products related to EVs, new energy vehicles, smart mobility, and fuel
cells
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Increase in sales of energy-saving GaN power semiconductors and electronic device related
products
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Increase in sales of wind power generation related parts
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Increase in sales of related parts due to change in demand for ICE vehicles
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Average temperature rise, and Change in Precipitation and Weather patterns |
Increase in sales for disaster prevention products and services due to increased flood risk
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Increase in sales for air conditioner parts due to more frequent use of air conditioning in
summer
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Decrease in product costs due to lower raw cotton prices
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Increase in sales of clothing for heat protection
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Severity of extreme weather events |
Increased costs due to physical damage and loss of business interruption caused by flooding
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* | Assessment of Impacts | : | :Positive Impact/ :Negative Impact |
Degree of Impacts | : | Less than 1 billion yen: / , More than 1 billion yen but less than 5 billion yen: / , More than 5 billion yen but less than 10 billion yen: / , 10 billion yen or more: / |
4. Identify Potential Responses
In the future, based on the results of the scenario analysis, all business divisions will minimize risks related
to greenhouse gas emissions while focusing on capturing the actual and potential opportunities related to the
products and services of each business division in the medium to long term.
In FY2023, the Nisshinbo Group will expand the scope of analysis to all its businesses by conducting climate
change scenario analysis for businesses that have not yet done so.
Business | Outline of Business Impacts | Direction of Responses |
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Common to all projects |
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(Solutions, Marine System, ICT/Mechanics, Mobility business) |
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Risk Management
The Nisshinbo Group has established and operates a risk management system to appropriately respond to management risks of business and to minimize losses in the event of management risks. With regard to the risks and opportunities related to climate change that the Group should be aware of, the Nisshinbo Group will primarily identify, analyze, and evaluate the risks in each business segment based on the “Risk Management Regulations.” Each business segment director will prioritize the risks and assume the magnitude of impact on the business under future scenarios. The Corporate Strategy Center is responsible for the overall mapping of this data, which is then discussed in the Board of Management and the Board of Directors.
Risk Management System
Risks and opportunities are assessed on a five-point scale based on the probability of occurrence and the degree of influence. Items whose products are more than constant are identified as important risks.
Taking into account the economic impact of identified risks, the Nisshinbo Group strives to respond by category to any of the four types of risk that can be avoided, mitigated, transferred, and held.
Risk Analysis Steps
The details of the risks and opportunities that the Group perceives as having the potential to have an important impact on the linkage performance and response can be found on the "Materiality, Risks and Opportunities" page.
Metrics and Targets
The Nisshinbo Group aims to capture climate change-related business opportunities and reduce risks. To reduce climate-related risks, the Nisshinbo Group actively promotes climate change measures, such as reducing energy conservation activities and PFCs (perfluorocarbons)* emissions with the aim of carbon neutrality by 2050.
* PFCs (perfluorocarbons): Fluorinated greenhouse gases used in dry etching and other processes in semiconductor
The business activities and environmental impact of the Group can be found in the "Material Balance" section.