In response to the recommendations announced in 2017 by the Task Force on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board (FSB), the Nitto Group announced its support in May 2022.
The Nitto Group recognizes that responding to climate change is an important management issue, and the Board of Directors makes decision on important policies and instructs and supervises their execution. Under the instruction and supervision of the Board of Directors, we have established a governance system centered on the Corporate Strategy Meeting.
To ensure the effectiveness of ESG management promotion, Nitto has appointed a Director in charge of ESG promotion and established a Director in charge within a special function department. The relevant department makes proposals on sustainability, including the identification of materiality issues, based on which the Board of Directors and the Corporate Strategy Meeting make decisions. The Representative Directors and Vice Presidents, who are members of the Board of Directors and the Corporate Strategy Meeting, instruct the responsible business execution departments and Group companies in their respective areas to implement the proposals, ensuring the effectiveness of ESG management promotion.
ESG management promotion activities include the management of opportunities and risks related to climate change.
Example of climate-related resolution passed by the Board of Directors
Based on the Paris Agreement adopted in 2015, we believe that reducing CO₂ emissions, which are the cause of global warming, is essential and an important social responsibility for the sustainable growth of the Nitto Group and the realization of a sustainable environment and society. Accordingly, we have declared the “Nitto Group Carbon Neutral 2050” to work toward the realization of a decarbonized society. The new medium-term management plan “Nitto for Everyone 2025,” which includes climate-change-related targets, was approved by the Board of Directors in fiscal 2022.
The declaration of The Nitto Group Carbon Neutral 2050 is a response to the social changes brought about by climate change. The new medium-term management plan includes targets and indicators for opportunities and risks identified through scenario analysis, and we are working toward the realization of a decarbonized society through the implementation of this plan.
The "Nitto Group Carbon Neutral 2050" targets are as follows.
- Carbon neutrality by fiscal 2050. *
- Decrease CO₂ emissions to 470,000 tons by fiscal 2030.
- Contribute to customer CO₂ emission reduction through products and solutions.
To analyze the impact that climate change may have on the Nitto Group’s business, we took a broad view of the value chain, from suppliers to customers. We applied two scenarios*, the 1.5°C scenario and the 4°C scenario, to our analysis of transition risks and opportunities.
As it turned out, we found that there was not much difference between the two scenarios, when it came to analyzing the extent of the impact on the Nitto Group’s business, partly because some customers are taking cutting-edge action toward the 1.5°C scenario, although differences do exist with regards to how fast the prices of carbon and crude oil increase, the intensity of customer needs for prices of carbon, and the supply of special raw materials. Accordingly, we do not see any need to fundamentally alter our stance with regards to the two scenarios.
The Nitto Group Carbon Neutral 2050 is a response to social changes brought about by climate change. The direction of Nitto’s climate change strategy with “CO2 emissions: 470,000 tons,” “Sustainable material usage rate: 30%,” “Waste plastic recycling rate: 60%,” and “PlanetFlags/HumanFlags category sales ratio: 50% or more” as goals for fiscal 2030 to achieve net-zero CO2 emissions have been confirmed to be in line with the current changes in social conditions of accelerating climate change countermeasures.
When the expansion of carbon taxes and GHG levies are taken as examples, however, it became clear that a burden of about 1 billion to 4 billion yen could be incurred around fiscal 2030 for carbon taxes. In addition, when we conducted risk assessments of physical risks using Aqueduct Floods in flood simulations with a probability of occurrence at the 0.1% level for one year at our manufacturing sites and major suppliers, it was suggested that 3 out of 54 Nitto Group facilities and 14 out of 27 major suppliers were at shutdown risk.
Although we believe that these risks can be reduced by initiatives to reduce CO2 emissions and formulation of BCPs, there is a possibility that further initiatives will be required depending on future social conditions. We will continue to evaluate opportunities and risks at the timing of major social changes and at time of our management strategy reviews, and we will reflect them in our management strategies.
Basic idea
The Nitto Group divides the risks that management recognizes as having the potential to have a significant impact on business activities into two categories: “business risks,” which are associated with our businesses, and “operational risks,” which can generate group-wide impact. Business risks include risks related to business, such as risks associated with business structure and overseas business operations; risks based on external factors such as exchange rate fluctuations and geopolitics; and risks related to technological competitiveness such as new technology development capabilities and intellectual property rights. Operational risks include those related to safety, the environment, disasters, and product quality and defects and risks related to information security, responses to antisocial forces, and risks related to antimonopoly laws, export control laws.
Risk management system
The Nitto Group manages major risks under the risk management promotion system stipulated in the Basic Policy on Internal Controls.
The business executing departments are responsible for controlling and managing “business risks,” and the specialized functional departments are responsible for “operational risks.” In order to develop a global risk monitoring system, the regional supervisors located in major overseas areas conduct monitoring on an area basis.
Information on risks managed by each responsible department is reported monthly for deliberation to the Corporate Strategy Meeting, which is composed of directors and executive officers. The results of the deliberations are immediately instructed to each responsible department, and measures to control risks, such as strengthening of control, are promptly implemented. Details of implementation and the status of improvement are reported and checked again at the Corporate Strategy Meeting, thereby enhancing the effectiveness of the Group’s risk management.
Risks related to climate change and water security are included in the business risks and operational risks.
Selection and management status of major risks
In addition to risks continuing from the previous fiscal years, risks that are to be newly added as subjects to management and reporting in the fiscal year are selected by the officers and departments responsible for risk management. The selection is conducted based on interviews with directors, responsible departments, audit firms, etc., as well as analysis of the agenda and details of deliberations at monthly meetings of the Board of Directors and the Corporate Strategy Meeting. The selection is finalized after deliberation at the Corporate Strategy Meeting.
Major risks are recognized and visualized for their relative importance. To do so, we classify risks using a graph with two axes: “degree of impact” on the business in case when the incident, etc. occurs on the vertical axis and the “likelihood of occurrence” of the incident on the horizontal axis (see right).
At the end of the fiscal year, the responsible departments self-evaluate these major risks (business risks and operational risks) that are reported and deliberated by the Corporate Strategy Meeting, based on evaluation criteria, such as the establishment of an execution system, the implementation of controls and countermeasures, and the occurrence of incidents and responses to them. The department in charge of risk management evaluate the results from an independent standpoint, receive approval from the officer in charge of risk management, and report the results to the Corporate Strategy Meeting and the Board of Directors as results of independent evaluations.
The targets and indicators for fiscal 2030 related to opportunities and risks set in the new medium-term management plan are shown in the table below.
