Climate Change

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Endorsement of TCFD Recommendations

In 2022, we declared our support for the Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures.Since then, we have been working to identify the risks and opportunities that climate change poses to our business activities, and to disclose information in line with the recommendations of the TCFD.

Fundamental Approach to Climate Change

Recent years have seen disasters and other events caused by abnormal weather around the world, heightening the sense of impending crisis over climate change. At the same time, the global trend towards decarbonization is accelerating, and the Japanese government has also declared its aim to achieve carbon neutrality by the year 2050.

Under such circumstances, to better embody our corporate philosophy of “Connecting People, Connecting Technology and Enriching the World,” the DJK Group aims to resolve customers’ environmental issues through business activities leveraging our unique engineering functions as well as aspire to always be a valued partner for our stakeholders. We will endeavor to mitigate and adapt to climate change through our business activities by providing products and services that help protect and improve the global environment.

TCFD Report

TCFD Recommended Disclosure Elements

TCFD Recommendations prescribe the disclosure in line with the four elements of governance, strategy, risk management, and metrics & targets in order to better understand how risks and opportunities accompanying climate change will affect company management as well as financial affairs.

DJK strives to enhance the disclosure in accordance with these elements, and firmly recognizes that addressing climate change contributes to the sustainable development of society and the medium to longterm improvement of our corporate value. Hence, we will continue to further promote initiatives in sustainability.

Governance

Since January 2004, we have operated an environmental management system (EMS) based on ISO14001 to systematically promote the reduction of environmental impact. We have designated the Representative Director, President & COO as the top management and Executive Officer, General Manager of the Administration Division as the person in charge of environmental management. Based on our environmental policy, we are making continuous improvements using the PDCA cycle.

The Sustainability Promotion Committee (currently, the Sustainability Committee) was established in April 2022 for the purpose of ensuring DJK’s sustainable growth. The committee deliberates sustainability-related matters, including climate change. It is chaired by the Representative Director, President & COO, and the Director, Managing Executive Officer, and Sustainability Officer serves as the officer in charge. The committee regularly monitors in-house initiatives and engages in the deliberation and consideration of future initiatives. The contents of its deliberations are reported to the Board of Directors, whose evaluation of sustainability initiatives also incorporates the perspectives of independent outside directors.

In April 2023, the Corporate Sustainability Department was established. This has further reinforced EMS operation and accelerated sustainability initiatives across the entire DJK Group, under the leadership of the CSuO with the Corporate Sustainability Department serving as the secretariat for the Sustainability Committee.

Strategy

The DJK Group has identified contributing to a sustainable global environment as one of our materialities. We've also established a basic philosophy on sustainability, an environmental policy, and set the realization of a decarbonized society as our target.

In addition to designating greenhouse gas (GHG) reduction rate targets for Scope 1 and 2 emissions, we have launched initiatives through our businesses. This includes engaging in decarbonization as part of our investment strategies under the "V2030" growth strategy.

Climate Control Risks and Opportunities

DJK has conducted a review of items affecting our business, based upon the climate-related risks and opportunities presented in the TCFD Recommendations. In conducting our review, we launched the TCFD Analysis Working Group, which is comprised of relevant business divisions, administrative units, and other departments, and spearheaded by the Corporate Sustainability Department. The Working Group has engaged in discussions and reviews, which have then been approved by the Sustainability Committee chaired by the Representative Director, President & COO. The major climate-related risks and opportunities that we anticipate, as well as their estimated impact on our businesses, are as follows.

Scenario Analysis Results

Reference Scenario

Configuration scenario 1.5℃ scenario 4℃ scenario
Future image of society Decarbonization will reduce fossil fuel-related businesses and increase demand or products made from new materials and new technologies Carbon-free and low-carbon movements are limited, while natural disasters caused by climate change will become more frequent and severe
Transition risk scenario “Net Zero Emissions by 2050 Scenario (NZE)”
(IEA WEO2022)
“Stated Policies Scenario (STEPS)”
(IEA WEO2022)
Physical risk scenario RCP2.6 (IPCC AR5)
SSP1-1.9/SSP1-2.6 (IPCC AR6)
RCP8.5 (IPCC AR5)
SSP5-8.5/SSP1-2.6 (IPCC AR6)

Climate Control Risks and Opportunities

Below are the results for the scenario analyses of our Plant & Energyプラント・エネルギー事業Icoand Automotive自動車事業IcoBusiness.

Note: Short term: within 3 years; medium term: 4 to 9 years; long term: 10 years or longer
Types of Risks and Opportunities Triggers Impact on the Company Segments Time Axis1 Financial Impact
1.5℃ 4℃
Risks Transition
Risk
Policies/
Laws and Regulations
Introduction of carbon pricing Increased cost of operating activities プラント・エネルギー事業Ico自動車事業Ico Medium term Low Low
Strengthened carbon regulations and GHG emission reporting requirements in each country Increased costs of transaction procedures, monitoring investigations, etc. プラント・エネルギー事業Ico自動車事業Ico Short term Low Low
Strengthened fuel and environmental regulations Loss of trading opportunities due to declining sales of new internal combustion engine vehicles 自動車事業Ico Medium term Low Low
Markets Soaring raw material prices Lower profit margins due to rising purchasing prices of products handled プラント・エネルギー事業Ico Medium term Low Low
Decline of the fossil fuel business Lower demand for existing equipment due to the downsizing of related industries and market technologies プラント・エネルギー事業Ico Medium term Medium Low
Failure of new businesses Decrease in sales due to failed investments in products utilizing new decarbonization technologies プラント・エネルギー事業Ico Medium term Low Low
Popularization of EVs Decline in earnings due to intensifying price competition in EV manufacturing facilities 自動車事業Ico Medium term Low Low
Reduced customer purchasing power and increased sales costs resulting from the growing number of EV manufacturers 自動車事業Ico Medium term Low Low
Decline in earnings from related manufacturing facilities due to reduced capital investment in internal combustion engine operations 自動車事業Ico Medium term Low Low
Slowing down of EV popularization Fewer business opportunities due to reduced capital investment stemming from stagnant demand for EVs 自動車事業Ico Medium term Medium
Popularization and expansion of mobility services Decreased demand for manufacturing facilities due to a decline in automobile production 自動車事業Ico Long term Low Low
Reputation Damage to reputation among stakeholders due to delayed response to environmental issues Labor shortages and declining labor productivity プラント・エネルギー事業Ico自動車事業Ico Medium term Low Low
Physical Risk Acute Increasing severity of extreme weather Loss of sales opportunities due to supply chain disruptions caused by floods プラント・エネルギー事業Ico自動車事業Ico Long term Low Low
Concerns about passing on increased costs such as logistics and insurance premiums to sales prices プラント・エネルギー事業Ico自動車事業Ico Long term Low Low
Chronic Rising temperatures Difficulties in procuring biomass raw materials プラント・エネルギー事業Ico自動車事業Ico Long term Low Low
Note: Short term: within 3 years; medium term: 4 to 9 years; long term: 10 years or longer
Types of Risks Triggers Impact on the Company Segments Time Axis1 Financial Impact
1.5℃ 4℃
Opportunities Resource Efficiency Carbon neutral policies Increase in trading opportunities due to subsidies プラント・エネルギー事業Ico自動車事業Ico Medium term Low Low
New energy sources Increase in trading opportunities in new markets プラント・エネルギー事業Ico自動車事業Ico Medium- to long-term Low Low
Markets New opportunities, such as CCS Increase in trading opportunities through horizontal expansion of drilling business 自動車事業Ico Long term Medium Low
Growth and expansion of the EV market Increased profitability due to increased demand for new production facilities 自動車事業Ico Medium term Medium Low
Expansion of trading opportunities due to increase in the number of companies related to EV manufacturing 自動車事業Ico Medium term Medium Low
Expansion of trading opportunities due to new capital investment caused by the development of new construction methods 自動車事業Ico Medium term Medium Low
Resilience External evaluations of initiatives to address climate change Seriousness of the Company’s effort to achieve decarbonization will lead to enhanced corporate value, improved external evaluations, and increased employee engagement プラント・エネルギー事業Ico自動車事業Ico Medium term Low Low

We have identified contribution to a sustainable global environment as one of our material issues and set the realization of a decarbonized society as a key goal. As part of this effort, we have begun initiatives across our business, including setting reduction targets for Scope 1 and 2 emissions and incorporating decarbonization into the investment strategies of our V2030 Growth Strategy.

Measures

The impact of climate change on our businesses in terms of both risks and opportunities is not inconsequential, so we recognize this to be one of the key issues management faces in achieving growth over the medium- and long-term. Based on our analyses of multiple scenarios, we have adopted measures to reduce climate change-related risks and secure corresponding opportunities. More specifically, we are incorporating climate-related risks and opportunities into consideration of business investments and advancing initiatives such as biomass power generation and ammonia manufacturing technologies.

As we move forward, we will continue to gradually expand the businesses which we analyze as well as regularly and continually monitor these analysis results. In addition, along supply chains where the DJK Group is positioned, we will not only offer environmentally-friendly products and services to our manufacturing customers, but also enter new growth markets and engage in a range of activities aimed at achieving carbon neutrality. These efforts will enable us to optimize our business portfolio and enhance the resilience of our business strategy.

Risk Management

The Risk Management Committee performs a central role in DJK’s risk management, and also considers sustainability-related risks among its agenda items. However, climate change risk and other important risks that should be addressed as a priority are monitored by the Sustainability Committee.

To implement effective and efficient risk management, the Risk Management Committee manages climate change risk, together with other risks, in line with DJK’s strategies, based on the Risk Management Regulations.

Metrics & Targets

The Group's metrics, targets, and results related to climate change risks are as follows.

  1. Scope 1: Direct GHG emissions from the business itself (combustion of fuel, industrial processes)
  2. Scope 2: Indirect GHG emissions associated with the use of electricity, heat, or steam provided by other companies
    DJK and its consolidated subsidiaries in Japan and overseas have been included in the calculation of emissions, but small bases with a limited effect on overall emissions have been excluded.
    Scope 2 is calculated based on the adjusted emission factors for each electric utility (for reporting in FY2023) stipulated in the Act on Promotion of Global Warming Countermeasures .
Item Targets FY2022 results
(t-CO2)
FY2023 results
(t-CO2)
Scope1 and Scope 2 Reduce greenhouse gas emissions in FY2020 (1,617.37t-CO2) by 46% by FY2030 and achieve net zero emissions by FY2050. 1,773.16 1,912.62

Participation in Initiatives

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