Climate Change Scenario
The Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD) asks all companies to assess climate-related risks and opportunities using climate change scenarios, and to reflect and disclose them in their business strategies and risk management. The Kyocera Group endorses the TCFD recommendations. We have established a governance system, implemented risk management and set targets, carried out scenario analyses, and are discussing business strategies based on the results.
The Kyocera Group has ranked climate change as one of our priority management issues. The CSR Committee (twice a year), which is attended by our top management, deliberates such matters as the setting of long-term environmental goals and strategies aimed at achieving them.
In addition, we share our climate change policy at the Kyocera Group International Management Conference (twice a year).
The Kyoto Protocol in 2005 established international rules for climate change measures, and the Paris Agreement in 2016 sparked further international action, with each country setting climate change goals. Since 2020, some regions have begun to set carbon-neutral targets. The SBT Initiative also revised the levels of its targets in October 2019. Recently, many companies also have targets for climate change, with more companies affirming their goals to achieve the global 1.5℃ target (preventing the rise of global temperatures exceeding 1.5℃) and Renewable Energy 100% (RE100), which is an initiative to bring together hundreds of businesses committed to 100% renewable energy. In addition, an increasing number of companies are demanding that their suppliers strive to achieve the 1.5℃ target and declare their support for RE100.
|SBT target level||Overview||Certified|
|2℃ level||Linear 1.23%~2.5% reduction per year from the base year||Until September 2019|
|WB2℃ level||Linear 2.5%~4.2% reduction per year from the base year||From October 2019|
|1.5℃ level||Linear over 4.2% reduction per year from the base year|
Japan has declared to become carbon neutral by 2050. The outline of the “Green Growth Strategy Towards 2050 Carbon Neutrality (Draft)” is as follows.
●Promote the development of next-generation solar cells for widespread adoption by 2030.
●Promote research and development of next-generation geothermal power generation technology.
|Next-generation power management industry||
●Enhance regulatory measures such as mandatory compliance with energy conservation standards, including for housing.
●Promote and build energy resource aggregation businesses and next-generation grids by utilizing digital technology and market functions.
|Hydrogen & ammonia fuel industry||
●Utilize the Green Innovation Fund to promote integrated experimental trials of inexpensive transportation technology and hydrogen power generation technology, for which there is expected to be significant demand.
●The development of fuel cell technology will improve performance while simultaneously expanding the market.
|Semiconductor & telecommunications industries||
●Support for research and development of power semiconductor devices.
|Automotive & battery industries||
●For commercial vehicles, by 2030, 20-30% of new light-duty vehicles sold will be electric vehicles, and by 2040, 100% of new light-duty vehicles sold will be electric vehicles or decarbonized fuel vehicles. In addition, technology verifications and the adoption of hydrogen fuel for large vehicles by 2030 will be used to establish a target for the widespread adoption of electric vehicles by 2040.
●Support large-scale investment in storage batteries (100 GWh), the introduction of electric vehicles (EVs) and fuel cell vehicles (FCVs), the establishment of charging infrastructure (150,000 units) and hydrogen stations (1,000 units), and the restructuring of supply chains and value chains.
Source: Excerpt from the points to be realized (summary) in the “Green Growth Strategy Towards 2050 Carbon Neutrality” (Draft) published by the Ministry of Economy, Trade, and Industry on June 2, 2021
Assessing the Impact of Climate Change on Our Businesses
The Kyocera Group incorporates climate change risks into our company-wide risk management. As a method of assessing risks and opportunities, we categorize requirements from sources such as trends in the global community and our stakeholders’ expectations of us, consider what is important to our stakeholders and what is important to the Kyocera Group, and then rate the impact into three levels, with items having a big impact ranked as “Major.”
(Excerpts of the major and medium assessment items)
|Items||Risks and opportunities for the Kyocera Group
(● Risk / ○ Opportunity)
|Transition risks (Policy risks)||Policy||Each country's carbon emission target/energy policy||
|Semiconductor & telecommunications, automobiles, storage battery business, etc.||
|Market||What customer’s want||
|Reputation||Longer product life||
|Physical risks||Acute||Intensified extreme weather||
|Chronic||Changes in precipitation patterns and rises in average temperature.||
We conducted a scenario analysis to ascertain Kyocera's future risks and opportunities related to climate change and tie them to our business strategy. In the scenario analysis, we considered international recognition and reliability and created original WB2℃ and 1.5℃ scenarios as well as 4℃ and 2℃ scenarios with reference to the following literature before conducting our analysis for 2030.
RCP8.5, RCP4.5, RCP2.6, IEA ETP 2DS, IEA ETP B2DS, IEA450, IEA NPS, IEA ETP 2017, IEA EPT NZE2050, IEA Sustainable Development Scenario, IEA WEO2019 Scenario, WRI Aqueduct Water Risk Atlas, Practical Guidelines on Flood Mitigation Planning in Consideration of Climate Change, etc.
|4℃||A rise of 3.2 to 5.4℃ in 2100 compared to temperatures during the Industrial Revolution.|
|2℃||A rise of 0.9 to 2.3℃ in 2100 compared to temperatures during the Industrial Revolution.|
|WB2℃||Temperature rise well below 2℃ in 2100 compared to temperatures during the Industrial Revolution.|
|1.5℃||Temperature rise below 1.5℃ in 2100 compared to temperatures during the Industrial Revolution.|
Government policies on climate change remain unchanged, power companies continue to generate electricity from fossil fuels, and CO2 emission factors do not decline. In addition, technological development will not progress in the energy industries, such as for photovoltaic power generation systems, storage batteries, and fuel cells, and society and customer decarbonization do not progress. In the semiconductor and telecommunications businesses, etc., technological development will advance, and production capacity will expand, and digital technologies such as AI, IoT, and smart cities will continue to grow. As a result, energy-related businesses will slow down, and the actual physical risks that become apparent will increase business continuity plan (BCP) countermeasure costs and raw material procurement costs.
The cost of physical risk countermeasures will increase, so ultimately, the final profit will decrease. However, while the increase in profits of energy-related businesses is small, note that this scenario is unlikely to occur because each country is engaging in efforts to achieve carbon-neutral targets.
Governments across the globe introduce support systems such as renewable energy, and electric power companies supply electricity with a low CO2 emission factor. Furthermore, technological development progresses in industries related to energy-related technologies such as photovoltaic power generation systems, storage batteries, and fuel cells. In semiconductor and telecommunications businesses, etc., technological development advances and production capacity expands, and digital technologies such as AI, IoT, and smart cities will continue to grow.
Although the physical risk is smaller than the 4℃ case, as the risk is thought to be larger. we will promote BCP measures based on the WRI Aqueduct Water Risk Atlas and the hazard map of the national government. Transition risk increases operational costs, such as increased payments for decarbonization. The number of suppliers affected by physical risks will increase, and this will increase raw material procurement costs.
As a result, the profits of energy-related businesses will increase, we believe that the increase in profits is likely to be offset by the cost of risk countermeasures.
Governments across the globe introduce support systems for renewable energy, and electric power companies supply electricity with a low CO2 emission factor. In industries related to energy technologies such as solar power generation systems, storage batteries, and fuel cells, companies promote technological development, strengthen collaborative efforts with electric power companies, and advance the use of renewable energy such as VPP technology and engage in efforts to support the creation of regional microgrids. In the semiconductor and telecommunications businesses, etc., technological development will advance, and production capacity will expand. We will also see further expansion of digital technologies, such as AI, IoT, and smart cities, demand forecasting of production planning electric power through DX visualization, and the stabilization of renewable energy imbalances.
Physical risks are thought to present less damage than in the 2℃ case, and BCP measures will be promoted based on the WRI Aqueduct Water Risk Atlas.The risk of transition is likely to increase, for example, carbon tax payments.
As a result, revenues from energy-related businesses exceed the cost of risk management due to decarbonization of society, and the final profit increases.
Governments across the globe introduce support systems such as for renewable energy, and electric power companies take efforts toward “Net Zero,” with decarbonization making further strides. In industries related to energy technologies, such as solar power generation systems, storage batteries, and fuel cells, companies collaborate with electric power companies and provide them with renewable energy, as well as engage in efforts to support the creation of regional microgrids. In the semiconductor and telecommunications businesses, technological development will progress, and production capacity will expand. In society, digital technologies such as AI, IoT, and smart cities grow, demand forecasting of production planning electric power through DX visualization and stabilizing renewable energy imbalance will be improved, and decarbonization will take further strides.
Physical risks are thought to be not so big, and BCP measures will be promoted based on the WRI Aqueduct Water Risk Atlas. As a result, decarbonization of society will increase the earnings of energy-related businesses and the impact of physical risks will be small, thereby the final profit increases.
Estimated financial impact for each scenario image
|4℃ Case||2℃ Case||WB2℃ Case||1.5℃ Case|
|Increase in profit||Small||Intermediate||Intermediate||Large|
|Costs of measures against risks||Intermediate||Intermediate||Intermediate||Intermediate|
Degree of financial impact Large: JPY 10 billion or more, Intermediate: JPY 1 to 10 billion, Small: JPY 1 billion or less
Social Issues and Solutions
In order to contribute to the decarbonization of society, Kyocera believes that it is necessary to expand the production capacity of semiconductors and electronic parts along with the development of virtual power plant (VPP)-related technologies, technologies to improve power generation and storage efficiency. Furthermore, mass production of storage batteries and technologies related to alternative energy, power management, hydrogen technology, storage batteries, etc., are also necessary. As a means of solving social issues, Kyocera will continue to resolve “economic issues” and “technical issues” surrounding renewable energy. Furthermore, as an in-house measure, Kyocera will clarify issues related to government policies, markets, reputation, and physical risks and continue to take action to resolve said issues.
Social Issues and Solutions
Economic Issues Provide inexpensive renewable energy
Solution: Establishment of Kyocera EPA LLC, and Kyocera Kanden Energy LLP
Kyocera EPA LLC has launched services aimed at companies that wish to adopt renewable energy and operators that supply electric power services. With a focus on new, detached residential buildings, Kyocera Kanden Energy LLP has launched services that make it possible to install solar power generating systems with no initial outlay.
Technological Issues Secure locations where solar power generating systems can be installed, stabilize electric power from renewable energy, which is affected by weather conditions
Solution: Leverage self-consignment for the transmission of renewable energy from external sources
When a site cannot be secured for a solar power generating system, renewable energy can be used by the “self-consignment” of electric power from solar power generating systems located elsewhere.
Solution: Clay-type Li-ion storage battery cells used in tandem with solar power generating systems
Kyocera plans to stabilize electric power from renewable energy by developing long life, very safe, low-cost storage batteries that are easy to link up and use in tandem with existing solar power generating systems. Private power consumption will also expand when surplus power produced by solar power generating systems and fuel cells is saved to storage batteries.
The 2030 energy mix proposal in Japan is based on the assumption that the Net Zero Energy House (ZEH) will be standardized energy-saving houses.
Means to resolve company issues
Solution: Introducing energy saving and optimizing electric power supply and demand with DX
To respond to the introduction of a carbon tax related to decarbonization, we are introducing solar power and fuel cells at Kyocera and are promoting RE100 initiatives at some locations. Going forward, we will use DX to optimize electric power demands in order to improve our own energy management.
Policy, market, and reputation issues
Solution: Examine the renewal of our long-term environmental target
The Kyocera Group's long-term environmental target has been certified by SBT at the 2°C level, but due to social conditions, customer demands, and the expansion of the renewable energy business, we have established a Task Force on Examining the Renewal of Long-Term Environmental Targets. This Task Force is examining setting stricter targets than our long-term environmental target (30% reduction in CO2 emissions in 2030 compared to FY2013).
Measures against physical risks
Solution: Risk analysis and implementation of countermeasures
With regard to acute physical risks, we will ascertain the possibility of disasters geographically, evaluate them using the formula below, and implement optimal measures such as installing water gates at each site.
Risk score = Σ (scope of damage impact, human damage, fires and explosions, environmental impact, recovery time, cost of damage to production, cost of damage to equipment) × coefficient of measures to avoid risks
For chronic physical risks, we will utilize the analysis results of international organizations such as Aqueduct Water Risk to examine measures for our entire supply chain.
Source: “Aqueduct Water Risk Atlas”, World Resources Institute (WRI), https://www.wri.org (viewed on: July 6, 2021)
- Environmental Safety Policy / Targets and Promotion System
- Climate Change Scenario
- Measures to Counter Climate Change
- Water Risk Response
- Recycling Activities
- Initiatives to Prevent Environmental Pollution
- Conservation of Biodiversity
- Environmentally Friendly Products / Green Procurement
- Environmental Communication
- A History of Our Environmental Protection Activities
- Active Promotion of Human Resources with Diverse Skillsets
- Human Rights Initiatives
- Promoting Diversity and Inclusion
- Occupational Safety
- Occupational Health, Safety, and Fitness Initiatives
- Supply Chain Management
- Approaches to Raising Quality and Customer Satisfaction Levels
- Social Contribution Activities
- Academic Advancement and Research
- Support for Culture and the Arts
- International Exchanges and Collaboration
- Environmental Protection Activities
- Local Community Activities
- Contributions to Society through Business Activities