In December 2021, Nippon Shinyaku declared its support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).*1 In addition to working to address already identified risks from the perspective of risk management, the Company will enhance its information disclosure by collecting and analyzing data for scenario analysis of climate-related risks and opportunities in the framework of the TCFD recommendations and devising specific measures to address identified risks and opportunities.
- *1 The Task Force on Climate-related Financial Disclosures (TCFD) was established in 2015 by the Financial Stability Board (FSB) to develop recommendations for more effective climate-related disclosures to be made by companies to investors, lenders and insurance underwriters.
Governance
The Director who is the Head of Business Management & Sustainability serves as Officer in charge of response to climate issues. This Director chairs the Environment Committee, which meets quarterly to ensure the implementation of Nippon Shinyaku’s Basic Environmental Policy, which was formulated by the Board of Directors. The committee formulates other environmental policies, promotes environmental preservation and other initiatives, and checks the results of environmental preservation activities, including the annual CO2 emissions reduction.
The same Director is also a member of the President-chaired Sustainability Committee, which meets twice a year, so that Group-wide sustainability activities will be further enhanced. The Nippon Shinyaku Group has identified tackling climate change as one of its material environmental issues. The details and progress of the relevant activities are reviewed by the Sustainability Committee every six months. The results of the Environment Committee and Sustainability Committee’s investigations are reported at least once a year to the Board of Directors, which reviews them and provides oversight.
Scenario Analysis
Recognizing the enormous impact climate-related risks and opportunities will yield on the company’s business strategies, Nippon Shinyaku has identified the risks and opportunities of climate change and evaluated their importance according to the following process.
This analysis and evaluation into climate change-related risks and opportunities was conducted utilizing a 1.5°C warming scenario and a 4°C warming scenario.
First, climate-related risks and opportunities were comprehensively sampled. Next, the sampled climate risks and opportunities were sorted according to their relationship to the company’s pharmaceuticals and functional food businesses. Finally, their importance was evaluated based on two criteria: degree of impact on the company, and probability of occurrence.
Selection of climate scenarios
Analysis and evaluation were conducted using a carbon neutral society-focused 1.5°C warming scenario, and a 4°C warming scenario. For the 1.5°C warming scenario, SSP1-1.9*1 was used; for the 4°C warming scenario, SSP5-8.5*2 was used.
- *1 SSP1-1.9: Holds warming to approximately 1.5°C above 1850-1900 in 2100 “after slight overshoot” and implied net-zero CO2 emissions around the middle of the century.
- *2 SSP5-8.5: A high reference scenario with no additional climate policy. Emissions as high as SSP5-8.5 are only achieved within the fossil-fueled SSP5 socioeconomic development pathway
Short-term,2021-2040 | Mid-term,2041-2060 | Long-term,2081-2100 | ||||
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Scenario | Best estimate(℃) |
Very high possibility range(℃) |
Best estimate(℃) |
Very high possibility range(℃) |
Best estimate(℃) |
Very high possibility range(℃) |
SSP1-1.9 | 1.5 | 1.2~1.7 | 1.6 | 1.2~2.0 | 1.4 | 1.0~1.8 |
SSP1-2.6 | 1.5 | 1.2~1.8 | 1.7 | 1.3~2.2 | 1.8 | 1.3~2.4 |
SSP2-4.5 | 1.5 | 1.2~1.8 | 2.0 | 1.6~2.5 | 2.7 | 2.1~3.5 |
SSP3-7.0 | 1.5 | 1.2~1.8 | 2.1 | 1.2~2.8 | 3.6 | 2.8~4.6 |
SSP5-8.5 | 1.6 | 1.2~1.9 | 2.4 | 1.3~1.9 | 4.4 | 3.3~5.7 |
Identified Risk/Opportunities and Measures
Category | Impact on Nippon Shinyaku | Measures | Period | ||||
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Short-term | Mid-term | Long-term | |||||
-2025 | 2026-2030 | 2031- | |||||
Risks | Transition risks | Policies and laws | Risk of energy costs and procured goods prices increasing due to carbon taxes and strengthened energy conservation laws |
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Delay in response to global environmental regulations |
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Markets |
Increases in market prices of procured goods due to increases in
demand for raw materials (pharmaceuticals) Risk of decreases in demand due to increases in product prices in accordance with increased market prices of procured goods (functional foods) |
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Stoppage of plant operation and business activities due to depletion of raw materials and other resources |
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Evaluation | Negative impact on stock prices and fundraising due to delay in tackling climate change |
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Physical risks | Acute risks | Increased risk of disruptions to supply chain, including raw material procurement and product shipping logistics, due to increases in regional torrential rains and largescale typhoons |
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Chronic risks | Risk of need to move plants and other sites due to impact of rising sea levels |
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Depletion of water resources and water intake limits due to changes in rainfall patterns (reduction in profits due to reduced production capacity) |
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Insufficient raw material procurement due to climate change |
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Opportunities |
Resource efficiency/ energy |
Reduction in production costs through a variety of improvements to resource efficiency, including energy conservation, reduced water utilization, and waste disposal |
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Optimization of production and logistics processes |
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Maintenance of cost competitiveness through introduction of renewable energies to reduce carbon tax burden |
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Resilience | Minimizing the damage of physical risks through implementation of systematic measures |
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Contribution to increasing corporate value through the company’s climate initiatives, including gaining customer trust, retaining employees, improving evaluation in recruitment, and improving evaluation from ESG investors |
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Strategy
Nippon Shinyaku is continually working to improve its environmental conservation activities (conserving energy and reducing CO2 emissions) based on its Basic Environmental Policy in order to achieve carbon neutrality by 2050. The company’s long-term goal is to realize net-zero CO2 emissions by FY2050. In addition, Nippon Shinyaku is also monitoring climate-related risks across its entire supply chain.
Nippon Shinyaku views the transition to a low-carbon economy as an opportunity, and recognizes the reduction of costs through energy conservation and recycling, and the development of relevant products as means to increase its competitiveness.
1.5°C warming scenario
In addition to the expectation that costs will increase due to tightening of regulations, including the introduction of carbon taxes; the risk of the price of raw materials and other items increasing is also anticipated. Nippon Shinyaku is propelling initiatives to reduce carbon and has set a CO2 emissions target of 6,088 t-CO2 by FY2030 (a 42% reduction from benchmark FY2020).
4°C warming scenario
In order to secure stable supplies of raw materials, Nippon Shinyaku is maintaining a diverse array of suppliers and is enhancing its stockpiling capabilities. In addition, we are also promoting the development of business continuity plans (BCPs), including those for weather-related disasters; and are accelerating investment in disaster prevention and response measures.
Risk Management
The Nippon Shinyaku Group has in place Basic Risk Management Rules, with the Director who is the Head of Personnel, General Affairs, Risk Management, Compliance & Digital Transformation acting as the Risk Management Officer, and a department dedicated to overseeing risk management. We have identified various possible risks, including climate change-related ones. Each department has devised measures to prevent the actualization of those risks and to respond to any realized risk. Further, every year, action plans are formulated to address the risks selected as highly serious for the entire Group or each department and enhance measures to prevent their actualization. The results of these activities are reported to the Risk & Compliance Committee and then to the Board of Directors at the end of each fiscal year so that activities in subsequent years will be improved.
FY2023 activity themes | Risk management goals |
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Natural disasters (earthquakes, eruptions, tsunamis, typhoons, wind disasters, lightning strikes, etc.), fires, and explosions |
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Enhancement of various disaster drills at the Odawara Central Factory | Conduct drills in the simulation of various disasters. |
Risk of losing product supply ability | Strengthen the system for a stable product supply through factory and supplier risk management and reduce the risk of our losing product supply ability. |
Stable procurement of raw materials, products, etc. | Monitor the supply-demand balance of all products we handle in cooperation with the Sales and Marketing Division and the Planning Department and appropriately manage inventories while especially taking into account inventory risks to products introduced from abroad to be provided exclusively for particular retailers. |
Appropriate management of chemical substances | Promote appropriate management of chemical substances by reducing the amount of chemical substances possessed, properly operating the chemical substance management system, and responding promptly and appropriately to revisions to applicable laws. |
Indicators and Targets
Nippon Shinyaku has established a greenhouse gas reduction target of reducing its greenhouse gas (Scope 1 and 2) in FY2030 42% from benchmark FY2020. As a climate-related opportunity the company has also established the ratio of hybrid company-owned vehilcle activities as a key performance indicator. Further, we will be striving to assess our capital outlays and allocation by using as indicators investments in environmentallyconscious facilities and facilities which contribute to reduced greenhouse gas emissions.
Greenhouse gas emissions | 42% reduction in greenhouse gas emissions in FY2030 (over FY2020) |
Climate-related opportunity | Increase ratio of hybrid company-owned vehilcle activities |