TCFD
Introduction
The World Economic Forum's 2022 Global Risks Report explicitly lists climate change as one of the leading threats to the planet The planet has taken measure to curb the impact of climate change, based on the 2015 Paris Agreement adopted at COP21, and now Japan along with over 140 countries and regions have declared their commitment to carbon neutrality by 2050.
The CCBJH Group considers climate change as one of the most important issues we face as a society, and in 2021 we updated our greenhouse gas (GHG) reduction targets to aim for a 50% reduction of Scope 1 and 2 emissions, and a 30% reduction of Scope 3 by 2030 (compared to 2015). We also aim to achieve carbon neutrality by 2050.
In February 2022 we endorsed the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. Furthermore, we have participated in the TCFD Consortium and Climate Change Initiative. We continue to take action to reduce GHG emissions.
We hereby present our disclosures based on the TCFD recommendations with reference to the updated guidance of October 2021.
Governance
We have established clear CSV Goals that include GHG emissions reduction, as a non-financial target, based on the common sustainability framework of the Coca-Cola system in Japan.
Since its creation in 2021, our TCFD working group has focused on mitigating the impact of climate change. By January 2023 a new sustainability committee will be established to formulate policies and strategies on sustainability issues that includes climate change. The committee is primarily composed of the Executive Leadership Team (ELT)* members and, depending on the agenda, function heads, other executives and staff may also participate in the meeting. It is chaired by the CEO, Calin Dragan, who is also Chairman of the Board of Directors. It is supported by the Sustainability Strategy Division. The committee meets four time a year and reports to the board of directors with feedback on all functions.
The board of directors oversees risk management processes including our response to climate change. When formulating management policies in the context of business risk appetite and growth, we take such processes into account. In addition to regular discussions by the management team, the board of directors evaluates climate change mitigation initiatives, incorporating them into annual and mid-term business plans. Furthermore, we explain impact of our ESG-related initiatives to external stakeholders at financial results briefings.
* ELT is the management organization of the entire CCBJH Group, including the CEO and each head
Strategy
Our risk analysis has identified climate change as one of the most critical issues to be addressed. We have formulated mitigation plans to respond to the identified risks and opportunities. We determined that a detailed analysis of climate change was needed. A scenario analysis (year 2030, region: global ) was conducted and mitigation plans to address the risks and opportunities were identified. This work was achieved by the TCFD Working Group in cooperation with the board of directors and each business unit from 2021 onwards.
Analysis was conducted for both scenarios (A 1.5°C/2°C and 4°C in global temperatures) as they would affect the beverage business, our primary business segment.
The worldviews and reference scenarios for each temperature range assumed in the study are shown in the table below.
| 1.5/2℃ | 4℃ | |
|---|---|---|
| Scenario | Climate change response progresses, intensifying the risk of regulatory and other transitions. Society where social changes associated with the transition to a decarbonized society are likely to affect business |
Climate change response stalls, natural disasters and other physical risks intensify Society in which rising temperatures and other climate changes are likely to affect business |
| Reference | IEA: NZE, SDS IPCC: RCP1.9, 2.6, 4.5 |
IEA: STEPS IPCC: RCP8.5 |
Transition Risks
| Transition risks of high importance | Details | Main mitigation plans |
|---|---|---|
| Cost increase due to introduction of carbon pricing | ■ Cost increase due to introduction of carbon tax and strengthening of emissions trading system, etc. Increased costs due to price shifting of carbon tax at suppliers |
■ Active adoption of recycled materials, promotion of weight reduction ■ Reduction of raw material consumption through lighter containers/packages, etc. |
| Cost increase due to energy conservation and GHG emission regulations | ■ Cost increase due to capital investment for energy conservation and renewable energy, etc. Increased procurement costs due to increased production costs at suppliers |
■ Reduce dependence on external power supply by introducing renewable energy Shift to use of alternative raw materials (in collaboration with Coca-Cola Japan) |
| Cost increase due to tighter plastics-related regulations | ■ Increase in procurement costs for recycled PET resin, etc. | ■ Shift to use of alternative materials active use of recycled materials Promote lighter containers |
| Cost increase due to water use regulations | ■ Increase in procurement costs due to introduction of groundwater tax | ■ Reduce water usage ■ Strengthening cooperation with local governments |
| Decline in sales due to an inadequate response to changes in customer behavior | ■ Decrease in sales due to shelf drop and customer defection from retailers, etc. | ■ Expansion of products in accordance with sustainable procurement ■ Promote environmentally friendly products (e.g., 100% recycled PET/labelless) |
| Loss of reputation among investors and financial institutions due to inadequate response | ■ Decrease in stock price and increase in financing costs in case of inadequate response | ■ SBT certification and participation in RE100 (TBC) ■ Proactive and continuous disclosure and dissemination of information based on TCFD-related and other factors |
Examples of mitigation plans in action
Reducing CO2 emissions per bottle by approximately 60%*1
We have introduced 100% recycled PET bottles in 4 brands and 44 products*2 including flagship products such as Coca-Cola. For the year 2022, we achieved a 50% sustainable material usage rate*2.
*1 Switching from ordinary PET bottles to 100% recycled PET bottles
*2 Sustainable materials refer to the total bottle-to-bottle recycled PET materials and plant-derived PET materials
-
- Content of
sustainable materials - 50%
(As end of December 2022) - (+10% year on year)
- Content of
-
1本でCO2
約60%
削減へReduces CO2 emissions by approximately 60% per bottle*
*When switching from regular PET bottles to bottles with 100% recycled PET materials
Reducing plastic waste
Since the 1970s, the Coca-Cola system has worked to reduce the weight of packaging and containers to reduce plastic used and make efficient use of our finite resources. Since spring 2021, Coca-Cola 700ml PET bottles have been reduced in weight from 42g to 27g.
Physical Risks
| Physical risks of high importance | Details | Main mitigation plans |
|---|---|---|
| Decrease in manufacturing efficiency and manufacturing volumes due to extreme weather conditions | ■ Increased procurement costs of raw materials ■ Increased response costs due to increased risk of infectious diseases |
■ Diversification of procurement sources ■ Strengthening of BCP response |
| Business shutdown due to extreme weather conditions | ■ Impact of restoration cost and lost sales due to shutdown of factories and other company-owned facilities due to hazardous weather conditions | ■ Identify and prioritize wind and flood risks in manufacturing sites, sales/distribution sites, and supply chain, and enhance mitigation plans |
| Supply risk due to extreme weather pattern changes | ■ Increased procurement costs of raw materials | ■ Diversification of procurement sources ■ Collaboration with suppliers (e.g., development of agricultural methods, TBC) |
| Increased asset deterioration and energy costs due to extreme weather pattern changes occurring over time, etc. | ■ Increase in utility and other costs due to rising temperatures | ■ Reduce dependence on external power supply by introducing renewable energy |
Examples of mitigation plans in action
Shifting to renewable energy
Since 2019, we have adopted the Yamanashi Power Plus "Furusato Hydro Plan", co-brand with Yamanashi Prefecture and Tokyo Electric Power Energy Partners, Inc. So CO2 emissions from electricity use at Hakushu plant are reduced to zero.
Energy Conservation
At each of our plants, projects are underway to increase energy efficiency, centered on improving machine efficiency, productivity, yield rate, and the introduction of cogeneration systems.
Opportunities
To minimize risks and maximize opportunities under multiple scenarios, we will reflect measures studied in our management strategy and mid-term plan and incorporate them into our annual plan.
In the future, we will continue to expand and refine the scope of disclosure of analysis results, including quantitative results, and periodically review our scenario analysis in response to social trends.
| Opportunities of high importance | Details | Main mitigation plans |
|---|---|---|
| Customer demand increase for products that contribute to energy conservation and GHG reduction | ■ Increase in sales due to environmentally friendly raw materials and packaging | ■ Develop and expand environmentally friendly products (e.g., 100% recycled PET bottle, labelless, reusable, package-less) |
| Changing customer preferences due to global warming | ■ Increase in sales of heat stroke prevention and healthy beverages | ■ Develop and promote heat stroke prevention and healthy beverage products |
| Cost and GHG emissions reduction through efficient use of renewables | ■ Reduction of electricity costs and GHG emissions by introducing renewable energy and energy-saving equipment (facilities, logistics, etc.) ■ Cost reduction through enhanced water efficiency |
■ Installation of manufacturing equipment equipped with the latest technology, Continuous improvement of manufacturing processes and plant equipment through monitoring ■ Further promotion of water source replenishment capacity improvement |
Examples of mitigation plans in action
Introduction of 100% recycled PET bottles
100% recycled PET bottles have been introduced for Coca-Cola and other flagship products (44 products from 4 brands).
Introduction of label-less products
Starting with I LOHAS products released in April 2020, currently manufacture 21 labelless products across 10 brands, including “Ayataka,” “Sokenbicha,” “THE TANSAN STRONG From Canada Dry,” “Aquarius,” “Coca-Cola,” “Georgia.” We plan to steadily expand our range of labelless products in the future.
Risk Management
Risk Management System (as of January 2022)
We have implemented a business resilience program that includes Enterprise Risk Management (ERM), that enables us to manage risks and opportunities. The program includes preventive and reactive activities that support business growth while responding to and recovering from adverse events. Our ERM program considers the full range of risks, including the areas of climate change and sustainability.
Our ERM program is aligned with the COSO framework and provides a comprehensive structure for identifying risks and opportunities, developing responses, and making timely and appropriate decisions to support sustainable business growth. The ERM Department implements processes to improve management's involvement in ERM. Regular departmental risk review sessions are held, and the department works closely with departmental risk owners to assess and manage business risks.
In 2022, we established a Risk Management Forum to continuously strengthen our risk management process. The Forum is comprised of senior management members drawn from all divisions, meeting on a quarterly basis. ELT meets every week to analyze and discuss risk. Furthermore, HRM reports to the ELT on Forum discussions, allowing the ELT to analyze risks and opportunities in detail on a quarterly basis.
Under this risk management framework, risks that could have a significant impact on our financial position are identified in terms of likelihood and impact. Therefore, climate change is considered one of the major risks. We believe that a detailed analysis is necessary regarding climate change and so in 2021 we conducted a scenario analysis on climate change risks to evaluate their impact. Transition risks (policy, reputation, technology, market), physical risks (acute, chronic), and opportunities (products and services, markets, energy sources, resource efficiency, resilience) are identified and prioritized based on likelihood of occurrence and impact when they occur.
Metrics & Targets
We have set the goal of becoming carbon neutral by 2050 and have established a mid-term target to reduce greenhouse gas (GHG) emissions across the entire value chain in Japan by 50% in Scope 1 and 2 and by 30% in Scope 3 by 2030 compared to 2015*. In this context, we will promote renewable energy. In addition, we have established and are working on the following targets related to packaging containers, water, and other resources.
We have already set indicators and targets for some of the risks derived from the scenario analysis and are making solid progress. In the future, through periodic review of the scenario analysis, we will consider the indicators and targets that will address the opportunities and risks. To achieve our targets, we see cost reductions through energy efficiency as one such opportunity, and we intend to be proactive, for example, by promoting the introduction and use of renewable energy sources.
* Calculated based on GHG Protocol. Reduction targets are based on absolute amounts.
