TNFD
Introduction
The CCBJH Group’s policy on environment defines one of our missions as making effective use of water and other natural resources. Such natural assets are indispensable to our business activities and must be passed on to future generations in a sustainable manner.
As a company that uses water for its business, it is essential to protect ecosystems such as forests, grasslands, and water sources. Our CSV water source goals prioritize their efficient use, waste reduction, and replenishment. Based on these objectives, we have been making efforts to conserve and replenish water as well as sustain biodiversity in priority areas.
In December 2022, we endorsed the initiatives of the Taskforce on Nature-related Financial Disclosures (TNFD) and joined the TNFD Forum. We registered as a TNFD adopted in December 2023 to enhance information disclosure in accordance with the final recommendations.
For our initial disclosure based on TNFD recommendations, we conducted analysis of business risks and opportunities related to nature with reference to TNFD v1.0 released in September 2023. We identified priority areas for water and biodiversity.
By strengthening our efforts to address biodiversity in our business areas, we aim to realize a sustainable society.
Governance
The sustainability committee established in January 2023 formulates policies and strategies on various issues that include climate change and biodiversity. The committee is primarily composed of the Executive Leadership Team (ELT)* members and, depending on the agenda, other executives and staff may also participate in the meeting. It is chaired by the CEO, who is also Chairman of the Board of Directors. The committee meets four times a year and reports to our Board of Directors on our sustainability initiatives.
The Board of Directors oversees risk management processes including our response to issues including water resources and biodiversity. When formulating management policies such as strategies and goals 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 nature-related issues that includes water resources and biodiversity, incorporating them into annual and mid-term business plans. Furthermore, we explain the 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 function head
Governance on affected stakeholders
Coca-Cola Bottlers Japan Holdings Group (hereinafter "Our Group") respects the global principles that are defined for the purposes of promotion and protection of human rights, including the United Nations Universal Declaration of Human Rights and the International Labour Organization's Declaration on Fundamental Principles and Rights at Work, and sets out policies to ensure the respect for human rights, and antidiscrimination measures in Japan ensuring we build respect for human rights at our workplaces.
Our local communities as important stakeholders, and our policy stipulates that we will listen to their opinions, learn from them, work together to reflect their opinions in our business activities, and engage in dialogue with them.
We require our suppliers to comply with our Supplier Guiding Principles, which reflect our values on human rights, the environment, and labor, and to ensure that they are fully aware of our respect for human rights.
Risk and impact management
Our Group considers sustainability to be one of our major risks and it is important that we respond to the TNFD recommendations in mitigating risk. We have used the LEAP approach, which is the framework recommended by the TNFD released in September 2023, to proceed with our evaluations of risks and opportunities.
We assessed the nature-related risks related to our business and we have investigated risk cases related to nature-related themes that are highly relevant to our business, identified potential nature-related risks throughout our value chain, and considered the magnitude of the impact of these risks. Based on the evaluation, we identified important issues that could affect on our business and our further analysis then narrowed the themes to water resources as a priority area.
For the analysis, we used publicly available tools such as the water-related risk assessment tool AQUEDUCT from the World Resources Institute (WRI), and the Integrated Biodiversity Assessment Tool (IBAT).
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. For the risk management structure, please visit TCFD page or our risk management page for further information.
Strategy
Identification of nature-related key issues
Our analysis identified five key nature-related issues for our business: water, climate change, surrounding ecosystem, land use such as forests, and waste.
This was done by screening for nature-related risks in industries relevant to our business and further assessment of the dependence and impact of nature-related issues using a nature risk assessment tools (e.g. AQUEDUCT, IBAT, etc.). We investigated cases where the business risks that were considered to have a large impact on business had materialized. The survey targets include our main raw materials, with reference to the SBTN High Impact Commodity List, as well as beverage raw materials such as corn, beets, sweet potatoes, sugarcane, coffee beans, tea leaves, dairy products, and packaging. In the material category we identified and selected plastics, aluminum, and iron. We also evaluated the importance of nature-related risks, considering the relationship between related nature-related themes and the value chain.
Based on the results of these surveys and analyses, we set the vertical axis as “Relationship with sector" and the risk importance assessment results on the horizontal axis as "Relationship with business" and we analyzed nature-related risks related to our business. We have organized them into a materiality map.
Identified major risks and opportunities
For the identified five materialities including water, we have summarized the major risks that could affect our financial planning such as increased cost, unstable supply, etc. On the other hand, enhanced traceability, technology development, and advanced product provision can lead to opportunities to contribute to biodiversity conservation. As a result of considering nature-related risks of high importance and potential impacts, we have confirmed that there are no items that would have an immediate significant impact on our business, strategy, or financial planning.
Transition risks
| Transition risks of high importance | Details | Time of occurrence |
|---|---|---|
| Introduction/strengthening of regulations | ●Responding to disclosure requests and sales regulations regarding raw materials that can lead to deforestation and forest degradation ●Response to plastic regulations (reducing plastic waste emissions, recycling, etc.) ●Possibility of introducing/strengthening restrictions on water intake from important biodiversity areas |
Short-Mid term |
| Increase in procurement costs | ●Protest activities related to the impact on surrounding ecosystems and deforestation caused by plantation and mine development have become active, and raw material procurement costs have increased as a result of the response. ●The coastal ecosystem becomes serious due to the outflow of pollutants (fertilizers, pesticides, etc) discharged from farms, and the costs of raw material procurement increase due to countermeasures ●Procurement costs rise due to the introduction of a groundwater tax and requests for cooperation funds for water replenishments |
Long term |
| Supply instability | ●The production of raw materials decrease due to the effects of drought and otherplants, make the supply unstable ●If water pollution at farms or mines has a significant impact on groundwater resources or aquatic ecosystems, the supply will become unstable due to business suspension orders ●Water intake problems occur due to inappropriate wastewater treatment, water leakage accidents, and leakage of hazardous substances at plants |
Mid-term |
| Development and dissemination of technologies with low environmental impact | ●If water intake in areas with high water stress affects local communites, orders to stop water intake or boycotts may occur ●Insufficient environmental measures to deal with wastewater impacts, excessive water intake, deforestation, etc at supplier farms can lead to reputational damage and brand damage ●Increasing criticism from NGO groups regarding plastic pollution, may lead to reputational damage and brand damage |
Mid-term |
| Criticism from consumers and society | ●If water intake in areas with high water stress affects local communites, orders to stop water intake or boycotts may occur ●Insufficient environmental measures to deal with wastewater impacts, excessive water intake, deforestation, etc at supplier farms can lead to reputational damage and brand damage ●Increasing criticism from NGO groups regarding plastic pollution, may lead to reputational damage and brand damage |
Short term |
| Evaluation from investors | ●Divestment occurred from investors and financial institutions concerned about lack of consideration for the ecosystem ●Lower ESG rating due to inability to meet criteria related to biodiversity by external rating agencies |
Short term |
| Occurrence of compensation | ●If excessive water intake or inappropriate wastewater treatment affects the surrounding ecosystem or local communities, production may be halted compensation may be occurred | Short term |
Physical risks
| Physical risks of high importance | Details | Time of occurrence |
|---|---|---|
| Increase in natural disasters | ●Water disasters such as leakage of hazardous substances due to flooding and inundation can lead to equipment damage and plant shutdowns | Short term |
Opportunities
| Opportunities of high importance | Details | Time of occurrence |
|---|---|---|
| Popularization of efficiency solutions | ●Reduce compliance costs by strengthening traceability and obtaining certification for raw materials with high nature-related risks ●Improve market reputation due to environmental measures taken at supplier farms and adoption of packaging materials with low environmental impact ● Reduce production costs by increasing the sophistication of cascade use of water resources |
Mid-term |
| Improving market evaluation | ●Improve ESG ratings and market evaluation by formulating business strategies consistent with international guidelines ●With the expansion of ESG investment and funds, consideration and contribution to the ecosystem will be evaluated in the capital market, giving an advantage in financing and improving corporate value |
Mid-term |
| Obtaining R&D funds | ● Possiblilty to raise funds through sustainable finance, etc. to conserve ecosystem, when proceeding with the development of new technologies and advanced recycling technologies | Long-term |
| Capturing ethical consumption demand | ●Increase in revenue due to the development of products that contribute to biodiversity and an increase in the provision of sustainable certified products | Long-term |
| Evaluation from consumers and society | ●By developing and providing advanced responses to biodiversity risks and products that contribute to biodiversity, increase our reputation with consumers and society, and improve our corporate brand | Mid-term |
Locational analysis on water
Of the five key issues identified, this project focused on water to identify high-risk areas and locations in the value chain. The location analysis identified priority areas by assessing water and biodiversity risks in sourcing countries and operating sites using publicly available tools for water use and effluents into the environment. No downstream risks were identified in the value chain and were therefore excluded, and analysis was conducted in direct operations and upstream.
Direct operation：Use of water resources, Wastewater into the environment
The use of water resources around our 17 manufacturing sites was conducted and using AQUEDUCT, the wetland database Global Wetland, and IBAT to confirm water stress and situation of ecosystems. We assessed water resource risks that may be affected by water withdrawal. It was confirmed that none of our plants are highly related to water-related issues.
Furthermore, regarding the use of water resources, we researched to understand if there are protected areas within 25 km upstream and for wastewater into the environment within 70 km downstream of our plants.
As a result, 10 manufacturing sites were identified as being close to important ecosystems that may be affected by the water use and wastewater of the sites, and risk mitigations for those sites were considered.
| Dependencies/Affects | Assessment | Analysis criteria | # of sites | Indicators for direct operations | Key countermeasures |
|---|---|---|---|---|---|
| Use of water resources | Water stress | Areas considered to be at high risk of water resource depletion | 0/17 | 200% replenish rate, focusing on watersheds near our plants (Target year 2025 ) 30% water usage reduction by 2030 Compliance with the Coca-Cola System (KORE) water standard |
Water resource conservation activities In the water resource areas of our plants, we have signed agreements with local communities, municipalities, forestry associations, etc., and are promoting water resource conservation activities to increase the "water resource conservation capacity" together with local stakeholders, achieving a water resource conservation rate of 411% (2023) Reduction of water usage By introducing production lines equipped with the latest technology and improving manufacturing processes and plant equipment through daily monitoring, we have achieved a 20% reduction in the amount of water used (based on 2015 standards) Water management We have set a goal of 100% compliance with domestic laws and the Coca-Cola System (KORE) water standards at all 17 plants, and have set voluntary standards for intake/wastewater treatment that are stricter than the legal standards and strictly manage them. Water risk assessment The Coca-Cola System's unique source water vulnerability assessment (SVA) is conducted at all plants every five years and approved by hydrological experts. In line with the SVA, we formulate a Water Management Plan (WMP) and, upon approval by management, systematically implement water conservation initiatives. The progress and effectiveness of the plan are evaluated annually. |
| Biodiversity | Presence or absence of wetlands, important protected areas, or areas should be conserved as natural environments
*Within 25km upstream |
5/17 | |||
| Wastewater into the environment | Presence or absence of wetlands, important protected areas, or areas should be conserved as natural environments *Within 70km downstream |
7/17 | |||
| Presence or absence of rivers used for local domestic water *Within 70 km downstream |
1/17 |
Water stress: A state in which a lack of water causes inconvenience in daily life. It is defined as being under water stress when the annual amount of water resources available per capita falls below a certain level.
Out of the ten manufacturing sites, three sites were identified with two analysis criteria items.
■ VC upstreams : Corn and sugarcane
We conducted a location analysis of corn and sugarcane as our main raw materials and raw materials with high water risks.
■ Use of water resources
The cultivation and processing of corn and sugarcane requires a lot of water, which can lead to depletion in areas with scarce water resources, such as islands. In addition, corn has experienced reduced yields due to drought in some areas, so it is possible that climate change will have a serious impact in the future. We used AQUEDUCT to assess the impact on use of water resources in areas where source corn and sugarcane as raw materials for sugar and sweeteners to identify high water stress area.
■ Wastewater into the environment
In particular, sugarcane grown in islands has been criticized for adversely affecting coastal coral reefs due to fertilizer leaching, pesticide and topsoil runoff, and wastewater from sugar factories. For sugar and sweeteners, targeting the region of main production countries of corn and sugarcane, we used the Water Risk Filter (WRF), a water pollution risk assessment tool, and Ocean+ Habitat, a marine ecosystem database, to check and prioritize water pollution levels and marine ecosystem protection areas. We have identified priority regions.
| Dependencies/Affects | Raw materials | Examples of risks | Countries identified as priority regions among where we source from | Indicators in VC upstreams | Initiatives in VC upstreams |
|---|---|---|---|---|---|
| Use of water resources | Corn | •Depletion of water resources due to the use of groundwater during cultivation and processing •Decrease in production volume due to worsening droughts caused by climate change |
USA Brazil South Africa |
100% sustainable sourcing (by 2025) | In order to procure raw materials that take water resources and biodiversity into consideration and promote activities in collaboration with stakeholders, we are in compliance with SGP, and conduct audits based on these principles. We also have our suppliers evaluated by external organization, EcoVadis. |
| Sugarcane | Australia Thailand |
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| Wastewater into the environment | Corn | •Adverse impacts on freshwater ecosystems and coastal coral reefs due to fertilizer leaching and runoff of pesticides and topsoil from farms. •Impact of wastewater from farms and processing sites on freshwater ecosystems |
USA South Africa |
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| Sugarcane | Australia Japan |
Metrics & Targets
The metrics and targets used to assess and manage material nature-related dependencies, impacts, risks and opportunities
We disclose GHG emissions, one of the core disclosure indicators of the TNFD. Regarding water withdrawals and consumption from water-stressed areas, as a result of a water risk assessment of our manufacturing sites, we have confirmed that none of our manufacturing sites are in areas with high water stress.We have set the non-financial targets CSV goals aiming to achieve 100% sustainable sourcing, compliance with SGP, as nature related targets, reducing water usage of 30% by 2030( vs 2025), maintaining water replenishment rate 200% . By focusing on water resource conservation, we are working to contribute to sustainable business and society and to realize our mission.
Within the Coca-Cola system, we regularly assess the vulnerability of water sources in line with the resource conservation guidelines established by Coca-Cola Japan and we develop conservation plans for the water we use at our plants. These plans are the basis for our activities that focus on reducing the amount of water used in the manufacturing process, recycling what water is used in manufacturing, and replenishing water resource areas.
We have water source agreements with local forestry cooperatives and governments in all water source areas of our 17 plants by strengthening collaboration with communities. The water source replenishment rate has significantly exceeded our target.
For core disclosure, we will work on future information disclosure other than water withdrawal and GHG emission. We will also conduct scenario analysis required by TNFD and consider setting alternative nature related targets.
