Climate Change

Climate change-related depletion of forest resources, which are raw materials for paper, will have a major impact on the group’s business. There are also physical risks resulting from global warming, transition risks due to stricter regulations, and the possibility of increased financial burden associated with responding to these risks. As it is our responsibility to minimize climate change impact by reducing greenhouse gas emissions throughout the group and the entire supply chain, we have identified “climate change” as a material issue that will have a significant impact on the group.
We have been working to reduce greenhouse gas emissions, mainly in our paper manufacturing and processing business. We will continue to promote further energy savings throughout the group and strengthen our efforts to achieve carbon neutrality by 2050.

The group recognizes that responding to climate change is an urgent issue. In June 2021, we announced our endorsement of the Task Force on Climate-related Financial Disclosure (TCFD) recommendations, and joined the TCFD Consortium. Since then, we have conducted scenario analyses of the risks and opportunities that climate change poses to the group’s businesses. In order to clarify the impact of climate change on each segment, we conducted an analysis of the Paper and Paperboard Wholesaling,* Paper Manufacturing & Processing, Raw Materials & Environment, and Real Estate Leasing segments based on the four elements proposed by the TCFD, and disclosed the following information on governance, strategy, risk management, and metrics and targets as recommended by the TCFD.
Based on our Sustainability Policy, we will work harder to address climate change and reduce greenhouse gas emissions, and will disclose information based on TCFD recommendations.

We established the Executive Sustainability Committee on April 1, 2022 with the aim of promoting sustainable business management in a more proactive way. Under the supervision of the Board of Directors, the Executive Sustainability Committee is responsible for formulating policy and planning strategy on all sustainability-related matters for the entire group, as well as overseeing the process of finding solutions to ESG issues and meeting our ESG goals. The committee reports to the Board of Directors on the progress of climate change initiatives, and important matters are resolved by the Board. Matters resolved by the Board of Directors are then directed to the OVOL Sustainability Promotion Meetings and the OVOL Environment & Safety Meetings, which are group-wide organizations under the Executive Sustainability Committee, for implementation at each group site. We also established a new Corporate Sustainability Division, which is responsible for implementing policies relating to sustainability across the entire group.

The group has identified risks and opportunities associated with climate change in four business segments: the Paper and Paperboard Wholesaling business, Paper Manufacturing & Processing, Raw Materials & Environment, and Real Estate Leasing, using two scenarios developed by the IPCC, IEA, and other specialist organizations: one in which the increase in average temperature is limited to 1.5°C (2.0°C in some scenarios) and another in which the average temperature increase exceeds 4°C. Risks and opportunities posed by climate change are categorized into risks associated with the transition to a low-carbon society (transition risks) and the physical impacts of climate change (physical risks). In order to incorporate these risks and opportunities into our business strategy, we conducted an assessment of the associated financial impacts in the short-term (up to 2025), medium-term (up to 2030), and long-term (up to 2050).

Based on the financial impact scenario analysis, we expect that the introduction of a carbon tax (transition risk) would have a significant impact, particularly on the group’s paper manufacturing business. On the other hand, we believe that we can lower that impact by promoting the reduction of greenhouse gas emissions.
In terms of physical risks, we estimate that damage to the main bases of the group in Japan due to abnormal weather events such as floods and typhoons would be in the range of JPY200 million to JPY600 million in the 1.5°C (2°C) and 4°C scenarios. In the event of severe damage to a business partner, there is a possibility that factories in the supply chain would not be able to operate and that the transportation of products, raw materials, and fuel would be disrupted, resulting in damage beyond our estimate.

The Executive Sustainability Committee identifies risks and opportunities related to climate change for the group as a whole, formulates response plans, instructs corresponding organizations led by the Corporate Sustainability Division, which is responsible for practical implementation, manages progress of measures, and reports to the Board of Directors.
The Board of Directors approves the content of reports or gives instructions on improvements, and monitors results to ensure that appropriate risk management is being implemented. Risk matters related to climate change deliberated by the Executive Sustainability Committee are directed to its subordinate organizations, the Risk Management Meetings, the OVOL Environment & Safety Meetings, and the OVOL Sustainability Promotion Meetings, and reflected in the group’s risk management.

In response to climate change, we formulated Japan Pulp & Paper Group Medium- and Long-term Reduction Targets for Greenhouse Gas Emissions, with the entire group working on various measures to reduce Scope 1 and 2 emissions.
Regarding Scope 3 emissions, we are currently working on calculating the emissions for the entire group and plan to consider reduction efforts in the future.