Disclosure of Information Related to Climate Change (Response to TCFD)

Environment

Disclosure of Information Related to Climate Change (Response to TCFD)

TCFD

The Oji Group announced its support for the Task Force on Climate-related Financial Disclosures (TCFD) in December 2020, and is working on climate-related information disclosure recommended by the TCFD.

The TCFD is a task force established by the Financial Stability Board (FSB) at the request of G20 Finance Ministers and Central Bank Governors Meeting. In June 2017, the TCFD released its recommendations that encourage companies to disclose the financial implications of climate-related risks and opportunities to help investors make appropriate investment decisions.

Governance

Recognizing efforts for sustainability including addressing climate change issues as one of the important management challenges, the Oji Group established the Sustainability Committee and the Corporate Sustainability Division in April 2022.
The Sustainability Committee, chaired by the Representative Director of the Board, President of Oji Holdings Corporation (Group CEO) and consisting of Directors of Oji Holdings Corporation (including Presidents of all COMPANIES), discusses the Group’s risks associated with sustainability and measures against those risks biannually. Matters discussed at the Committee are referred for discussion and reported to the Group Management Meeting depending on the importance, and after deliberation by the Meeting, the Board of Directors makes a decision on execution of matters. In FY2022, the Group CEO appointed a female Independent Outside Director as a new member of the Committee.
The Corporate Sustainability Division carries forward matters determined by the Sustainability Committee as a division which oversees and manages the Group’s efforts for sustainability.

Strategy

Climate-related risks and opportunities for us have been analyzed as shown below. We recognize the importance of transition risks due to policies and regulations such as carbon taxes in the medium term toward 2030, physical risks such as changes in precipitation and weather patterns in the long term toward 2050, and opportunities for increased demand for low-carbon products in the medium to long term.
To meet challenges for transition to a decarbonized society, we have set our GHG emissions reduction targets and are working to reduce coal consumption, increase the net increment in carbon stocks by forests, and develop wood-derived products as a plastic alternative. While continuing our present efforts, we believe, will limit the impact on our business from the transition to a decarbonized society, we will continue to analyze risks and strengthen our resilience^*1.

*1The concept of climate resilience involves organizations developing adaptive capacity to respond to climate change to better manage the associated risks and seize opportunities, including the ability to respond to transition risks and physical risks. (Source: TCFD recommendations)

Risk Management

The Corporate Sustainability Division examines risks on a Group wide basis with assistance from external experts, and the Sustainability Committee analyzes them while discussing their importance and priority. Impacts on our business, strategy, and finances are assessed quantitatively and qualitatively, using scenarios for 1.5°C (2°C) and 4°C for the medium term (2030) and the long term (2050)^*2.
The Corporate Sustainability Division is in charge of overall management of responses to climate-related risks based on the strategy across the Group, and the Sustainability Committee manages the progress. Specifically, for the reduction of GHG emissions, we have organized a project team and are working to reduce coal consumption and expand the net increment in carbon stocks by forests. Furthermore, climate-related risks are referred for discussion and reported to the Group Management Meeting depending on the importance, and integrated into company-wide risk management.

*2Transition risks were analyzed based on two scenarios: IEA’s 2°C Scenario (IEA 2DS) showing a pathway to possibly limit the warming to 2°C, and the Net Zero Emissions by 2050 Scenario (NZE 2050) to achieve net zero CO₂ emissions by 2050. Physical risks were analyzed based on the RCP1.9, RCP2.6, and RCP8.5 scenarios. In RCP8.5, the average global temperature is projected to rise by more than 4°C and natural disasters are expected to become more frequent.

Indicators and Targets

We have set the following targets based on the 1.5°C target in the Paris Agreement. The carbon price of 140 USD/t-CO₂ (2030 level in developed countries) from the Net Zero Emissions (NZE) scenario of the International Energy Agency (IEA) is used as the internal carbon pricing (ICP) for risk analysis and evaluation items for investment decisions.

Financial Impact of Climate-related Risks and Opportunities

Climate-related Risks, Opportunities, Strategies, and Responses

You can see this table by scrolling horizontally.

Type		Driver (Factor causing an impact on our business)	Awareness of business environment	Impact on our business				Strategies and countermeasures
				1.5°C (2°C) scenario		4°C scenario
				2030	2050	2030	2050
Transition risks	Policies, laws and regulations	Fluctuation of fossil fuel-derived energy prices	Increase in costs related to procurement using fossil fuel-derived energy and electricity due to changing energy mix	Small	Small	Small	Small	Pursue thorough-going energy conservation and efficient operation of in-house power generation facilities to reduce fossil fuel consumption and electricity purchase to optimize overall energy costs Enhance the operation of renewable energy sources such as hydro and biomass energy toward net zero carbon emissions in FY2050
	Policies, laws and regulations	Tightened CO₂ emissions regulations	Increase in energy consumption and credit operating costs due to the Enhance the operation of renewable energy sources such as hydro and biomass energy toward net zero carbon emissions in FY2050 introduction of carbon tax and tightening of regulations on emissions trading	Large^*	Small^*	Medium^*	Small^*
	Markets	Increasing stakeholders’ interest in low-carbon products and services	Increase in boycott activities toward products and services created using energy derived from fossil fuels due to increased awareness of decarbonization among consumers	Small	Small	Small	Small	Convert to renewable energy and other fuels that emit less CO₂, and enhance energy conservation measures Further promote resource-circulation, environmentally friendly business initiatives such as forest recycling and recovered paper recycling
	Reputation	Negative feedback from stakeholders	Decline in demand for paper products because of the impression that unnecessary tree felling facilitates global warming Lower evaluation and difficulty in obtaining financing due to a failure to respond to investors’ request	Medium	Medium	Small	Small	Continuously disseminate information on the status of sustainable forest management initiatives to stakeholders Promote the acquisition of forest certification, announcement of procurement policies, such as no illegal logging, and ensuring traceability of suppliers Implement environmental education to communicate environmentally-friendly business activities in collaboration with environmental NGOs, etc. Be registered as Type I or Type II Registered Wood-related Business Entity as defined in the Clean Wood Act Conduct due diligence to prove the legality and verify the legality in connection with the procurement of wood raw materials and biomass fuels
Physical risks	Acute	Increasing severity of extreme weather events	Business stagnation such as facilities affected by and supply chain disruptions caused by a large scale natural disaster	Small	Small	Small	Small	Formulate and regularly review a BCP, and enhance BCM Keep abreast of and monitor the status of key raw materials Enhance our relationship with suppliers, and stabilize procurement by diversifying suppliers
Physical risks	Chronic	Changes in precipitation and weather patterns, and rising average temperatures	Increase in procurement costs primarily as a result of deterioration of growth conditions for trees, key raw materials for our products	Small	Small	Large	Large	Enhance stable procurement through procurement from multiple sources in North America, South America, Oceania, etc. Expand and promote effective utilization of company-owned forests Conduct survey and research on impacts of temperature and precipitation on growth of trees, and select tree species suitable to the area
Opportunities	Resource efficiency	Effective resource utilization Reduction in water use and consumption	Increase in demand for advanced water treatment technology and water management due to flooding, drought, precipitation fluctuations, and higher demand for clean water in water stress areas	Small	Small	Medium	Medium	Further expand the water treatment business primarily by promoting the expanded service for the production of water for daily use Propose innovative technology leading to the effective utilization of water resources
	Energy sources	Use of low emission sources of energy	Increase in demand for renewable energy toward realization of a decarbonized society	Small	Medium	Small	Small	Promote the power generation business such as wind power generation and micro hydroelectric power generation
	Products and services	Changes in consumer preferences Development of new products and service through R&D and innovation	Increase in demand for low-carbon and environmentally-friendly products due to increased awareness of decarbonization and environment	Large^*	Large^*	Large^*	Large^*	Enhance the alternate use of biomass plastics made from biomass and the development of paper materials as an alternative to plastic packaging, and expand sales opportunities
	Markets	Use of incentives	Expansion of support for forest preservation activities under the forest usage and forestry promotion policy Possibility that carbon credit trading associated with forest absorption after 2050 will increase the value of company-owned forests, and that requests for forest management/ assistance in management (providing know how) may increase	Small	Medium	Small	Small	Plan and implement the management of company-owned forests in line with national and local governments policies Maintain and improve productivity of planted trees by conducting research and technology development tailored to the relevant areas

*Impact amount Small: less than 10 billion yen Medium: not less than 10 billion yen but less than 50 billion yen Large: not less than 50 billion yen
Impact levels without asterisk mark (*) represent qualitative assessment.