The business operations of The Nisshin OilliO Group are based on plant resources. Our response to climate change, which has a major impact on plant growth, is therefore a key issue for management, and in March 2021 we expressed our support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Going forward, we will respond to the TCFD recommendations by analyzing the risks and opportunities associated with climate change, compiling simulations of the financial impact and so on, and proactively engaging in information disclosure.
|Metrics and targets||
As a premise for our climate-change scenario analysis, we assumed a world in which the temperature has risen 2℃ and 4℃ since the Industrial Revolution and considered and identified the risks and opportunities in both cases. At the same time, we considered measures for risks and opportunities that would exert a substantial impact on our Group’s business operations and estimated the financial impact.
As risks expected to exert a substantial impact on our business operations, the 2℃ scenario includes increased costs due to carbon taxes and the purchase costs of CO2 emission credits, and the 4℃ scenario includes increased procurement costs as a result of lower raw-material production linked to the greater frequency and severity of natural disasters. In the latter case, it is also expected that there would be reduced capacity to supply our products and corresponding declines in sales due to such incidents as flooding and power outages at production plants caused by typhoons or other disasters.
|Risk classification||Impact on business||Impact level|
|Transition risks||Policy and legal||Carbon pricing||There is a risk that the cost of energy, containers, transportation, and so on will increase due to hikes in and further introduction of carbon taxes. Furthermore, due to the introduction of corporate CO2 emissions trading schemes, purchase costs for emission credits could arise.||High|
|Lawsuits||As climate change prompts shifts in the social environment and stricter laws and regulations, there is a risk of being subject to lawsuits for supply-chain law violations, forest destruction, or human-rights issues.||Medium|
|Technology||Switch to decarbonization equipment and production methods||Capital investment expenses will increase as we proceed with large-scale equipment installations for the decarbonization of our production systems. In addition, there are risks that investments do not prove to be as effective as expected and that breakthrough technologies cannot be introduced due to a shortage of funds.||High|
|Market||Increased sustainability-considerate purchasing behavior||Regarding palm oil and other materials, purchasing behavior toward products that guarantee sustainability will gain momentum. As a result, there is a risk that raw-material costs will rise. Furthermore, in the case that sustainability cannot be guaranteed, there is a risk that consumers will drift away due to the decline in product value, and sales will drop.||High|
|Reputation||Acceleration of investment and financing with consideration for sustainability and climate change||If our efforts to address sustainability and climate change are delayed, or if information disclosure regarding the status of company efforts is inadequate, there could be a risk of declines in our stock price and stalled financing. Furthermore, there is a risk that the spread of unfavorable rumors about the company could diminish our corporate value.||Medium|
|Physical risks||Acute||Greater frequency and severity of natural disasters at raw-material producing areas and production sites||If there were a rise in damage from hurricanes, flooding, and so on in raw-material producing areas, there is a risk that procurement costs would increase as a result of price rises linked to reduced production. In addition, if production sites were damaged, there is a risk that our production, sales, and logistics capabilities would temporarily be diminished, and sales would decrease.||High|
|Chronic||Changing weather patterns (rising temperatures, changes in precipitation, etc.)||If weather patterns were to fluctuate drastically, there is a risk that our procurement costs would increase due to raw-material price rises linked to the reduced production of soybeans, palm oil, and other core raw materials. Furthermore, there is a risk that the quality and safety of our raw materials, as well as the stability of our product supply, would be adversely affected.||Medium|
As an opportunity that would exert a substantial impact on our business operations, we can cite the fact that stable raw-material procurement will be possible since no significant decline in the growth of plants for our raw materials was observed whether the temperature rise was 2℃ or 4℃. Furthermore, since such factors as the development and sale of products curbing CO2 emissions and the use of sustainable raw materials would lead to enhanced customer satisfaction, we see a good opportunity here to increase sales.
|Opportunity classification||Impact on business||Impact level|
|Resource efficiency||Improved energy efficiency||As a result of the introduction of efficient equipment and advanced production management, we can improve energy efficiency at production sites and reduce production costs.||High|
|Energy source||Use of renewable energy||Responding to customer requirements for reduced supply-chain emissions, we will use renewable energy and manufacture and sell low CO2 emission products (Scope 1 and 2). This will lead to enhanced customer satisfaction and thus increased sales.||Medium|
|Products and services||Development of products with low CO2 emissions||Responding to customer requirements for reduced supply-chain emissions, we will develop products with low CO2 emissions from a life-cycle assessment perspective (low oil absorption when cooking, longer shelf life, etc.). This will lead to enhanced customer satisfaction and thus increased sales.||High|
|Markets||Increased sustainability-considerate purchasing behavior||In order to reduce the impact of climate change, the importance of forest conservation is growing, and demand for sustainability-considerate materials (products) is spreading. In particular, in the case of palm oil, which has the largest production volume among oils and fats, we recognize that since the supply of certified oil requested by customers leads to strengthened relations with our business partners and the acquisition of new opportunities for sales, we can achieve increased sales.||High|
|Growing demand for plant-derived products in the cosmetics industry||For the Fine Chemical Business, which targets the cosmetics industry in which naturality (plant-based preferences and environmental considerations) is burgeoning, the demand for plant-derived products is growing and our sales are expected to increase. In addition, its development into a core business second only to the Oil and Fat Business will lead to the stabilization of revenue for the entire Group.||High|
|Resilience||BCP strengthening||By strengthening our Business Continuity Planning (BCP) in preparation for the greater frequency and severity of natural disasters stemming from climate change, it will be possible to maintain product supply systems in times of emergency and raise our corporate social value. As a result, in addition to increased net sales and higher share prices, we believe that this will contribute to our fund procurement advantage.||Medium|
|Promotion of the recycling of containers and packaging and stable procurement||In response to climate change, the shift away from fossil fuel is making progress. As plastic is our main raw material used for product containers, our procurement of raw materials for containers can be stabilized and our corporate value improved by establishing resource recycling through investment in recycling companies and switching to bioplastic and plastic container alternatives.||Medium|
Measures for the risks and opportunities that could substantially impact the Group’s business operations are shown below. Among other things, we will endeavor to reduce our CO2 emissions, ensure sustainable raw-material procurement that gives consideration to the environment and human rights, comply with laws and avoid lawsuits, develop and sell value-added products, and strengthen our BCP in consideration of natural disasters.
Going forward, we will continue to examine impact levels and, over the longer term, analyze such matters as the growth of plant materials, core energy sources, and changes in customer demands.
|Carbon pricing||Improved energy efficiency||
|Transition to decarbonization equipment and production methods|
|Increased orientation toward sustainability considerations||
|Growing demand for plant-derived products in the cosmetics industry||
|Greater frequency and severity of natural disasters||BCP strengthening||