Response to the TCFD Recommendations
1. Philosophy
JSR Group sees responding to the problem of climate change currently facing society as one of the most important issues for the company, and we are therefore actively working to reduce greenhouse gas emissions both internally and externally. As JSR Group is also a supplier and manufacturer of chemical materials, we understand that our production and distribution processes have a variety of effects on climate change. At the same time, we can help mitigate climate change indirectly through our materials and products. For these reasons, we consider climate change as one issue most deeply connected to us.
It is in this context that we expressed our support for the TCFD*1 Recommendations in October 2020. We believe that these recommendations will contribute to the development of a sustainable society that is transitioning to a decarbonized economy. As a chemical company that takes climate change seriously, we seek to more deeply understand the opportunities and risks in the Group’s business activities. We take action accordingly and strive to proactively and publicly disclose our initiatives. We will continue our quest to reach “net zero” GHG*2 emissions by 2050, as we committed to in 2021. Moreover, through our products, we will contribute to a reduction of GHG emissions by society as a whole.
*1 TCFD (Task Force on Climate-related Financial Disclosures): Founded by the Financial Stability Board in 2015. In June of 2017, the TCFD recommended that financial institutions, companies, governments, and the like disclose their climate change impacts in their financial reports. More than 3,100 organizations around the world have endorsed the recommendations (as of March 2022; from data published by the TCFD).
*2 GHG: Greenhouse gases
The TCFD Recommendations call for disclosure of information pertaining to climate change-related governance, strategy, risk management and metrics and targets. JSR Group is taking the following action in line with these recommendations.
| Governance | Strategy | Risk Management | Metrics and Targets |
|---|---|---|---|
| Development of a managerial governance structure relating to climate change risks and opportunities | Analysis of impacts that climate change-related risks and opportunities will have on business, strategic and financial planning | Development of framework for assessing and managing climate change-related risks and opportunities | Establishment and progressive disclosure of metrics and targets for managing risks and opportunities |
2. Governance
JSR utilizes a supervisory structure, overseen by the Board of Directors, to examine and carry out appropriate responses to issues that could potentially pose business risks. These responses include climate change measures and other sustainability initiatives. Since FY2020, the Chief Sustainability Officer (CSO) has also served as a company director, contributing to more robust supervision by the Board of Directors.
The Sustainability Planning Committee headed up by the CSO examines and promotes initiatives. The Sustainability Promotion Committee receives reports on and discusses the content and results of these initiatives four times a year. The most important matters are reported also to the Board of Directors. The Sustainability Promotion Committee is chaired by the President, with company officers in charge of units also participating. It discusses all JSR Group businesses and functions from a sustainability perspective.
Our responses to climate change are incorporated into our mid-term business plan and management targets and approved by the Board of Directors. In turn, the mid-term business plan is incorporated into annual plans. Each unit executes measures in keeping with these plans and targets. Progress gets reported to and discussed by the Sustainability Promotion Committee. The Board of Directors supervises and monitors the results and offers feedback to support improvements.
Board of Directors discussions that included climate change (FY2021)
- Status report on sustainability (ESG) initiatives (including climate change response) (June)
- Status report on initiatives for TCFD Recommendations (June)
- Report on establishment of sustainability indicators (KPI) and targets (including climate change response) (December)
- Report on establishment of sustainability KPI medium- to long-term plan (March)
Director Remuneration Linked to Climate Change Response
The yearly bonuses of the CEO and President are determined based on Group performance (90%) and a non-financial evaluation (10%). This means that bonuses are linked to progress on Group-wide sustainability management indicators such as reducing GHG emissions and promoting DE&I. The amount of remuneration based on non-financial evaluation is first discussed by the Remuneration Advisory Committee and then decided by the Board of Directors, who can set it to any amount from 0% to 200%.
3. Strategy
In FY2019, JSR Group began a scenario analysis in line with the TCFD Recommendations. The purpose here was to assess climate change-related business risks and opportunities and establish strategies, indicators, and targets. An assessment of the significance of climate change and an analysis of climate change scenarios (qualitative) were completed in FY2020. However, we are revising the earlier results of our qualitative analysis because we transferred (carved out) our Elastomers Business to another company in FY2021. Of all our core business domains (the Digital Solutions Business, Life Sciences Business, Elastomers Business, and Plastics Business), this was the one with the greatest impact on climate change.
The carve-out of the Elastomers Business, which accounted for the greatest share of JSR Group’s GHG emissions, does help to mitigate the Group’s risks, but we are determined to continue taking sufficient measures without letting up. Moreover, we are continuing our quantitative assessment in FY2022.
At the same time, we recognize that there is no time for delay in responding to climate change around the world. Thus, we have already formulated measures to reduce GHG emissions and have set preliminary indicators and targets, which we are beginning to act on.
- Climate-Related Risk Significance Assessment
- Socio-economic scenario assumptions
- Formulation of business impact scenarios and determination of degree of impact
- Climate Change Scenario Analysis (Qualitative Determination)
- Investigation of risk and opportunity impact stemming from changes in JSR's business environment (scenarios) as a result of climate change
- Climate Change Scenario Analysis (Quantitative Determination)
- Quantification of impact that JSR scenarios will have on future business strategy and financial affairs, and strategic incorporation of results
- Identification of Potential Implementation Measures
- Determination of climate change strategy implementation measures and selection of management metrics
Climate-Related Risk Significance Assessment
For those social environments associated with JSR Group business, we assessed climate change impacts over the short term (five years), medium term (10 years), and long term (30 years).
* External information utilized includes IPCC_RCP2.6, RCP8.5, and IEA_B2DS
Climate Change Scenario Analysis (Qualitative Determination)
A climate change impact-related scenario analysis for JSR business was performed based on the gravity of the climate-related risks. One big change since the previous year’s scenarios is that the analysis did not include the Elastomers Business, which we transferred to another company.
Assessment Targets
Digital Solutions Business, Life Sciences Business, and Plastics Business were chosen as JSR Group’s core business domains.
Assessment Method
- （1）Based on the socio-economic scenario assumptions, relevant business impact scenarios were formulated and the degree of business-specific impact determined.
- （2）Based on the potential for, and impact on business (human loss, financial impact, etc.), of the above, particularly significant risks and opportunities were identified. In the course of this, factors such as trends in international discussion, development regions and other company’s practices were considered.
Assessment Results
- （1）Impact Scenarios and Degree of Business-Specific Impact
Small ← Size of Impact → Large
| High-Impact Risks / Opportunities | Risk | Opportunity | Impact on Business | Impact period | ||
|---|---|---|---|---|---|---|
| Digital Solutions | Life Sciences | Plastics | ||||
| World of +1.5℃ | ||||||
| Increased opportunities for life-cycle CO2 reduction (bring attention to climate change challenges) | ✔ | Short term | ||||
| Strengthening of GHG emissions regulations | ✔ | Medium term | ||||
| Establishment and increase of carbon costs | ✔ | |||||
| Emergence of customers demanding decarbonated products (e.g., RE100) | ✔ | |||||
| Evolution of low-carbon energy sources | ✔ | ✔ | ||||
| Increased demand for environmentally-beneficial products | ✔ | ✔ | ||||
| Fundamental lifestyle transformation | ✔ | |||||
| Mainstream adoption of sustainable finance | ✔ | |||||
| Change in how human resources are secured | ✔ | Long term | ||||
| Popularization of advanced decarbonization technology | ✔ | ✔ | ||||
| Change in automotive industry / Increased mainstream adoption of EV | ✔ | ✔ | ||||
| Increased need for recycling / reuse of tire materials Expansion in demand for recycled and recyclable resins |
✔ | ✔ | ||||
| More frequent flooding and more severe storm and flooding damage in Japan | ✔ | |||||
| World of +4℃ | ||||||
| Increased opportunities for life-cycle CO2 reduction (bring attention to climate change challenges) | ✔ | Short term | ||||
| More frequent flooding and more severe storm and flooding damage | ✔ | Medium term | ||||
| Rise in sea levels | ✔ | Long term | ||||
| Rise in temperature | ✔ | |||||
| Supply chain disruption due to more severe storm and flooding damage | ✔ | |||||
| Fundamental lifestyle transformation | ✔ | |||||
- （2）Scenario drivers and impacts on JSR Group (to assessment of financial impact)
| Scenario drivers | Category | Factors (qualitative analysis results) | Impacts on JSR Group |
|---|---|---|---|
| Increased energy costs because of carbon pricing | Transition |
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| Rising prices for raw material because of carbon pass-through |
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| Ensuring corporate value |
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| Damage caused by disaster | Physical (acute) |
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| Maintenance of work and social environment | Physical (chronic) |
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| Scenario drivers | Factors (qualitative analysis results) | Impacts on JSR Group |
|---|---|---|
| Business growth resulting from responding to environmental changes |
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We will continue to perform climate change scenario analysis (quantitative determination) and identify potential measures we can take, while learning the financial impacts of the risks and opportunities associated with climate change. We will regularly review these and report the results to the Board of Directors for discussion there as part of an ongoing PDCA cycle.
4. Risk Management
JSR Group believes that preventing major crises and minimizing their effects on business activities should they occur are important management challenges. Given this, we have formulated Risk Management Policies and empower the Risk Management Committee to lead our risk management efforts.
Our independent risk management system has operated since FY2009. Under the leadership of the Risk Management Committee, all units in Japan and abroad, including Group companies, regularly identify risks. A risk map that we use charts the level of each risk’s business impact and the frequency of its occurrence. Among risks that we identify, we label those with potentially big impacts on business continuity as “JSR Group Risk Factors.” Senior management monitors and regularly reviews such risks, thereby building and maintaining a system to prevent and prepare for crises. We take a similar approach to climate change-related risks.
Quantitative results of the scenario analysis scheduled for this fiscal year will be consolidated into manifested risk, which will help us to conduct more precise risk management.
Please refer to the page “Risk Management” for more details.
As for opportunities, we project that society’s response to climate change will greatly transform the business environment in which JSR Group operates. We see such changes as new business opportunities. We can grow our business by timely offering technologies that are refined and innovated for the future.
5. Indicators and Targets
JSR Group has declared our aim of becoming carbon neutral in terms of our own GHG emissions by FY2050. To establish milestones along the way, we formulated intermediate environmental targets for 2030 and yearly GHG emissions reduction plans. Please refer to our Sustainability Report’s section on climate change mitigation to see our GHG emissions reduction track record.
FY2050 Targets
We in JSR Group continue working actively toward our aim of “net zero ” GHG emissions by 2050.
FY2030 Intermediate Targets
Globally, we are taking measures to conserve energy and switch to renewable energy. Our aim is to reach CO2 emissions that are 30% lower in FY2030 than they were in FY2020. We are also challenging ourselves to implement innovative energy technologies and promoting the development of eco-friendly products and services to help shape a low-carbon, recycling society.
6. Participation in Related Group
JSR Group participates in the TCFD Consortium, as we endorse its aim of contributing to “a virtuous cycle of environment and growth.” Through a process of dialogue among enterprises, financial institutions, and others that support the TCFD, the consortium promotes effective and efficient disclosures based on the TCFD Recommendations and works to ensure that information so disclosed is appropriately evaluated and financing is encouraged.