Climate Change

“Global Vision 2030” expresses our vision of the future for the Kikkoman Group. It states our “goals” and strategies to achieve these by the year 2030, including our goal to “become a company whose presence in global society is ever more meaningful, through activities unique to Kikkoman.” We want to contribute to solving global issues, so that the company will be valued by people around the world.

In recent years, many places around the world have faced social issues such as health problems, water shortages, and flooding due to high temperatures and heatwaves. The damage from these issues has continued to grow. These types of abnormal weather are strongly related to climate change, and are social issues that threaten life, finance, and economic activity on a global scale. In light of this, climate change has been incorporated as one of the Sustainable Development Goals, and long-term goals have also been defined within the Paris Agreement.

Based on the long-term goals in the Paris Agreement, the Kikkoman Group is working to reduce CO₂ emissions and seeking to realize net-zero CO₂ by 2050. To achieve this target, we have committed to Science Based Targets (SBT), and we are promoting initiatives to cut at least 30% of CO₂ emissions by 2030 compared with 2018 based on our Long-Term Environmental Vision. We will also update our medium- to long-term CO₂ emission reduction plans as appropriate in accordance with future technological innovations.

CO₂ emissions and reduction targets

*Net zero CO₂ emissions means to achieve an overall balance between CO₂ emissions produced and CO₂ emissions removed

Disclosures based on TCFD recommendations

The Kikkoman Group, or the Group, recognizes that climate change is one of the most serious issues facing international society. In addressing climate change, the Group is putting into practice its management principles of becoming a company whose existence is meaningful to the global society, while understanding the financial implications that climate change could have on the resilience of its strategy for sustaining growth.

In this context, the Group has declared its support of the Task Force on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board (FSB). Based on TCFD recommendations, the Company evaluates risks and opportunities for its operations from climate change, and makes disclosure about governance, strategy, risk management, and indicators and targets.

Governance

At the Group, the CEO is the chief executive officer for the entire Group, and the Group Management Committee serves as a deliberative body for the CEO’s decision-making. At meetings of the Group Management Committee, discussions are held about policy formulation and initiative reinforcement, while risks and opportunities are constantly monitored with social and environmental issues regarded as important management topics. The Company also formulates long-term business plans with the Kikkoman Group Long-Term Environmental Vision as a major pillar for addressing climate change. To align issues identified in this vision with the Group’s strategies, the CEO reports on progress towards climate-related targets to the Board of Directors. Based on these reports, the Board of Directors determines and supervises the Group’s major policies, including those related to climate change, to be reflected in the Group’s business strategy.

In addition, the Group has established the Corporate Social Responsibility Committee headed by the Representative Director, Senior Executive Corporate Officer, and Chief Strategy Officer. Based on the Group’s business strategy, the Group is advancing Companywide initiatives to solve social issues, including climate change. The Corporate Social Responsibility Committee secretariats examine social issues, including climate change, and report to the CEO. The Corporate Social Responsibility Committee also reports to committees attended by the CEO (Group Management Committee, etc.) and discusses social issues.

Moreover, a General Environment Preservation Committee, headed by the Chief Production Officer (CPO), an Executive Corporate Officer of Kikkoman Corporation, is in place to disseminate details about targets and policies related to climate change and other environmental protection activities to Group companies and business site organizations. The committee also promotes the accumulation of expertise and technologies related to the environment and improves the Group’s responsiveness to change. Moreover, environmental preservation subcommittees, comprised of members centered on environmental management officers at each base, are set up under the General Environment Preservation Committee, facilitating the sharing of detailed data and case studies.

Strategy

The Group formulated the Global Vision 2030 (GV2030) in 2018 as its long-term vision for defining basic strategies and goals based on its management principles. In formulating the GV2030, management analyzed material issues from society’s perspective and the Group’s perspective, and identified three core material issues comprising “the global environment,” “food & health” and “people & society.” The Kikkoman Group Long-Term Environmental Vision, its environmental vision through 2030, was created in 2020 to guide specific measures. While advancing activities under this vision and others, the Group has long understood that flooding risks associated with earthquakes and climate change could result in business disruptions and weaker earnings. Accordingly, the Group has advanced measures, such as creating Business Continuity Plans (BCP) and running simulations of natural disasters. As a Group, management monitors risks that could have a major impact on operations caused by climate change, such as potential changes related to the use of natural ingredients in its core products. Amid growing concerns in society about the risks of climate change, the Group analyzes risks in multiple scenarios that could affect the business domains of the Group, based on the TCFD recommendations to quantifiably measure risks and the medium- to long-term impact on the Group from climate change.

Scenario Analysis

The Group’s scenario analysis is based on Representative Concentration Pathways (RCP) scenarios, referring to reports by the Intergovernmental Panel on Climate Change (IPCC), and sustainable development scenarios advocated by the International Energy Agency (IEA). Below, the Group presents the results of its analysis in each scenario and the estimated impact on its operations.

Climate change scenarios and models	Details
RCP 8.5	Summary of scenario analysis: ・The IPCC has reported that climate change could lead to more frequent and larger natural disasters. In light of this, the Group used the RCP 8.5 scenario to analyze the potential impact of climate change on its production sites, based on location information for each of its major production sites. In situations where climate change has an even greater impact, the Group used the RCP 8.5 scenario to measure the impact on the Group. ・Among natural hazards, flooding, strong winds, high tides and forest fires were analyzed. To understand current conditions for natural hazards, the Group analyzed changes in hazards caused by climate change, and measured the potential impact of these changes on each production base. To understand natural hazards today, the Group referred to the Flood Hazard Map of the World & European Union, GAR 2015 and other databases, while also consulting hazard maps published by the Ministry of Land, Infrastructure and Transport and local governments in Japan, in addition to data gleaned from simulations run by external consulting firms. The Group’s analysis of trends under climate change relied on RCP 8.5 for flooding and high tides, and SRES A1B and SRES A2 for strong winds during typhoons and forest fires, respectively. While verifying the change in disaster frequency with existing literature, research results and hazard maps, the Group measured the potential impact from increases in global temperatures. ・The Group’s analysis covered natural hazards at the production sites of the entire Group. ・Due to the need to make decisions from a long-term perspective, the Group referred to RCP 8.5 until 2100. Results of scenario analysis: ・For all the production sites of the Group, flooding presents the greatest risk among natural hazards. For flooding, typhoon-force winds, and forest fires, climate change is likely to increase the frequency of these events, and higher tides pose the threat of flooding to these production sites with or without climate change. Impact on business strategy of scenario analysis results: ・The results of this scenario analysis are used in the evaluation of climate change's impact on the business strategies of the Group. Before the scenario analysis was performed, the Company was aware of the risk of business interruptions and decline in earnings caused by flooding risks. Groupwide, management has advanced measures that include the formulation of Business Continuity Plans (BCP) and simulations of natural disasters. The results of the scenario analysis have prompted management to consider additional measures at sites at risk of serious impacts from climate change in the future. ・In 2020, the Group established and released the Kikkoman Group Long-Term Environmental Vision as a long-term environmental policy for 2030. The results of this scenario analysis informed the creation of targets for this long-term environmental vision.
RCP 6.0 RCP 8.5	Summary of scenario analysis: ・To understand changes in its ability to procure key raw materials, the Group referred to the volume of key raw materials procured by country of procurement for the Group. Using this data, the Group assessed climate change’s impact on changes in harvest volume per unit of land area by country of procurement, and measured changes in its ability to procure these raw materials. The Group used data from simulations run by external research organizations to better grasp changes in harvest volume due to climate change in each country. Under these simulations, the Group analyzed the impact of climate change in two scenarios (scenario based on RCP 6.0 and SSP2, and a scenario based on RCP 8.5 and SSP3) on harvest volume per unit of land (t/ha) for soybeans and wheat, and used this data in its analysis. To gain clarity on changes in harvest volumes from current levels, the Group analyzed by country of procurement the changes in harvest volume per unit of land (t/ha) for applicable crops of soybeans and wheat. Based on the results of this analysis, the Group calculated the weighted average of projected harvest volumes (t/ha) while referring to ratios of procurement source. To evaluate the impact on the Group under more serious circumstances, the Group employed RCP 6.0 and RCP 8.5 scenarios. ・The analysis covered soybeans and wheat, the main ingredients used in the core soy sauce business of the Group. ・Due to the need to make decisions from a long-term perspective, the Group referred to RCP 6.0 and RCP 8.5 until 2100. Results of scenario analysis: ・As a result of this analysis, the Group concluded that harvest volume per unit of land for soybeans has increased in importance, in that it will start to decline from 2060. Impact on business strategy of scenario analysis results: ・The results of this scenario analysis informed the evaluation of impacts on the Group’s business strategies. Before the scenario analysis was performed, the Company managed risks so that they would not impact operations, such as the procurement of key raw materials from other regions or use of alternative raw materials. In light of the results of the scenario analysis, management has begun to evaluate the strengthening of measures to mitigate the serious impact of further climate change on the procurement of soybeans. However, this serious impact will not start to materialize for several decades. Since there is still time to evaluate the situation and take countermeasures, this risk presently does not influence the business strategies of the Group.
IEA’s sustainable development scenario	Summary of scenario analysis: ・The Group compiled estimates of total CO₂ emissions based on its business growth targets, referring to current total emissions (tCO₂) under Scopes 1 and 2 for the Group’s production sites. Under the IEA’s WEO SDS scenario, the Group calculated estimates of costs to achieve the Group’s CO₂ reduction targets over the medium to long term. The Group analyzed the cost of achieving its targets in a number of scenarios, such as a scenario where capital is invested and production efficiency is improved without the additional use of renewable energy for almost the entire amount of emission reductions, a scenario where renewable energy is deployed to cover the entire usable amount, and a scenario where a carbon tax is paid for the entire amount of emissions, depending on the renewable energy market. ・Timeline is by 2030, in line with the Group’s medium- to long-term targets for reducing CO₂ emissions. ・Total emissions (Scopes 1 and 2) of production sites for all of the Group. Results of scenario analysis: ・The Group’s production sites have already seen progress in terms of capital investments, fuel conversion and improvements in production efficiency, so it will not be easy to choose additional measures for reducing CO₂ emissions from a cost-benefit perspective. The Group has production sites in OECD countries where carbon taxation may increase, and these sites account for more than 90% of the CO₂ emissions of the entire Group. Production costs will likely increase unless the Company can reduce CO₂ emissions. Impact on business strategy of scenario analysis results: The results of the scenario analysis are reflected in the business strategies of the Group. In GV2030, the Group intends to help solve issues in global society through unique activities, and aims to increase its meaningfulness in global society by 2030. Reducing CO₂ emissions is a core element of addressing major social issues in GV2030. Accordingly, the results of the scenario analysis are reflected in measures to reduce CO₂ emissions across the Group by fiscal 2031. ・The Kikkoman Group Long-Term Environmental Vision through fiscal 2031 was drawn up in 2020 based on the aims of GV2030, and it is linked with business targets. The Group aims to reduce CO₂ emissions by at least 30% by 2030, compared with levels in fiscal 2019. Its business strategies contain measures for cutting CO₂ emissions with the intention of achieving this target. The Group is considering additional purchase of renewable energy as a major means of reducing CO₂ emissions.

Risk Management

At the Group, to fulfill its responsibilities to stakeholders and realize stable business development, the Group advances initiatives to prepare for risks that may affect the activities of the Group. Given the global reach of the Group’s many businesses, there are a variety of different risks and opportunities that must be understood and managed. Executive officers at subsidiaries and business divisions are put in charge of preventing the materialization of risks.

In October 2010, with the objective of accurately managing the various risks faced by the Group, the Group formulated the Kikkoman Group Risk Management Guideline (Risk Management Guideline), which lays out the basic elements of risk management. In the Risk Management Guideline, risk is defined as all uncertainties in management and includes the following. Its definition of risk goes beyond natural disasters and accidents to include environmental problems, such as climate change.

(1) Possibilities to cause direct or indirect economic loss to the Kikkoman Group
(2) Possibilities to interrupt or stop business continuity of the Kikkoman Group
(3) Possibilities to cause damage to the credibility of the Kikkoman Group and undermine brand images

The Group analyzes scenarios to assist with the evaluation, management and appropriate response to climate-related risks over the medium to long term, while identifying and addressing physical risks and transition risks. Through partnerships with external organizations (Japan Climate Leaders’ Partnership and The Consumer Goods Forum), the Group ascertains the attitudes and regulations of countries regarding climate change, and reflects this information in its initiatives as necessary. Every year, the Group comprehensively assesses the business-related risks of the Group, and the issue of climate change is one such risk. The Group identifies risks that affect operations and analyzes the degree of impact of each risk, and submits risk reports to the Board of Directors.

Metrics and Targets

The United Nations Framework Convention on Climate Change (COP21) adopted the Paris Agreement in 2015 to keep the average increase in global temperatures to well below 2°C compared with before the industrial revolution, and try to keep the average temperature rise below 1.5°C.

In light of the long-term targets of the Paris Agreement, the Group aims to have net zero CO₂ emissions by 2050, and set in motion initiatives to cut CO₂ emissions. Based on its long-term environmental vision, the Group is working to reduce its CO₂ emissions by 30% or more by 2030, compared with the fiscal 2019 level. The Group will periodically update its medium- to long-term plans for cutting CO₂ emissions to align with technological innovations in the future.