For Kagome, which uses nature's bounty in its products, conservation of the natural environment is essential to the continuity of its business. We recognize that response to climate change is a particularly high priority issue. We conduct climate change scenario analysis and based on the results, we are actively working on response to climate change and conservation of water and biodiversity as priority issues.
Response to the New Framework for Climate Related Disclosures (TCFD)
The final report of the Task Force on Climate-related Financial Disclosures (TCFD), which was established by the G20 Financial Stability Board, entitled "Recommendations of the Task Force on Climate-related Financial Disclosures" was released in June 2017. Following these recommendations, Kagome conducted climate change scenario analysis in 2019 to shed light on the risks and opportunities faced our business operations. Since 2020, we have begun reviewing our indicators and targets. In April 2022, we endorsed the recommendations of the TCFD.
Information Disclosures Following the Four Thematic Areas of the TCFD Recommendations
Governance
The Kagome Group recognizes that an interruption in the procurement of raw ingredients is the greatest risk facing its business operations. Abnormal weather patterns due to global warming drastically affect the growing regions of raw ingredients. To avoid this risk, we made a revision to our medium to long-term CO2 reduction targets in 2021, which were approved by the Board of Directors in 2018, in order to reduce greenhouse gas emissions and accelerate initiatives that prevent global warming.
Kagome's President & Representative Director is responsible for all of the company's environmental activities, including climate change response, under Kagome's ISO 14001 environmental management system. The President evaluates the effectiveness of the environmental management system through biannual management reviews, following the company's environmental policy, and maintains responsibility and authority to order improvements.
Strategy
The emergence of climate change represents a major risk for Kagome as a company that utilizes agricultural produce as raw ingredients. At the same time, however, it can also be an opportunity for harnessing our long-standing technologies. The table below shows examples of Kagome Group's risks, countermeasures and opportunities.
| Risk items | Countermeasures and opportunities | |
|---|---|---|
| Short-term and medium-term | ■ Extreme weather and changing weather patterns ■ Declining production yield caused by water stress |
■ Acquisition and sales of vegetable varieties that can withstand climate change ■ Development and usage of tomato cultivation system that can produce tomatoes with the fewest amount of water |
| Long-term | ■ Rising carbon prices ■ Changing consumer behaviors ■ Loss of biodiversity |
■ Increased CO2 reduction targets and initiatives to achieve them ■ Active development of environmentally friendly products and certified products ■ Proposals and promotion of agriculture in symbiosis with living organisms |
For details, see our website.
https://www.kagome.co.jp/english/csr/environment/activity/globalwarming/
The risks and opportunities of climate change represent the risks and opportunities of Kagome's business operations. As such, they have been included in our business plan together with other risks.
Risk management
Kagome has established the Enterprise Risk Management Committee, chaired by the President & Representative Director, as a body for supervising the company's risk management activities. The body helps to speed up the decision making process in terms of our risk response policy and issues based on priority selection and evaluation. Identified risks and opportunities concerning climate change are incorporated into the Environmental Management Plan* as issues to be addressed by the entire company.
* See our website for issues and KPI in the Kagome Environmental Management Plan.
https://www.kagome.co.jp/english/csr/environment/plan/
Indicators and targets
With the aim of achieving net zero emissions of greenhouse gases by 2050, the Kagome Group has established an emissions reduction target for 2030, which received certification from the Science Based Targets (SBT) Initiative*. The Group has reviewed its greenhouse gas emissions reduction targets in response to 1.5oC scenario for Scope 1 and Scope 2.
* An international initiative that certifies the greenhouse gas emissions reduction targets of a business are consistent with the level set in the Paris Agreement
| Item | Targets (compared to 2020) | FY2020 results (t) |
|---|---|---|
| Scope 1 and Scope 2 | Reduce greenhouse gas emissions by 42% by FY2030 (1.5℃ scenario) | 143,524 |
| Scope 3 | Reduce greenhouse gas emissions by 13% by FY2030 | 1,315,239 |
(FY2021 results will be announced on our CSR website following third-party verification)
Scope 1: Direct emissions of greenhouse gases from businesses (burning of fuels, industrial processes)
Scope 2: Indirect emissions from the use of electricity, heat, steam supplied by another company
Scope 3: Indirect emissions outside of Scope 1 and Scope 2 (emissions of other companies related to the business' activities)
Overview of Scenario Analysis Based on the TCFD Recommendations
Kagome conducted climate change scenario analysis in 2019 following the TFCD recommendations. The scenario assumed the worldwide temperature will increase by 2 degrees Celsius and 4 degrees Celsius centered on the procurement and production areas, which are where Kagome is expected to be most impacted by climate change. Based on this, Kagome identified risks and opportunities as well as examined countermeasures. As a result, in the 2-degree scenario, Kagome's business was greatly impacted by soaring costs for raw ingredients along with containers and packaging caused by the introduction of carbon taxes. In the 4-degree scenario, Kagome's business was impacted substantially by soaring water prices and the growing intensity of extreme weather including strong wind and rain. Going forward, we plan to expand the scope to analyze the situation by considering the impacts on products caused by changes in consumer behavior due to climate change.
Kagome Group's Risks and Business Impacts
| Risk items | Business impacts | ||||
|---|---|---|---|---|---|
| Categories | Main category | Sub- category |
Indicators | Observations (examples) |
Evaluation |
| Transition risk | Policy /Regulations |
Rising carbon taxes | Expenditures | Rising costs due to broad impacts on raw ingredients, containers, and packaging caused by the introduction of carbon taxes | Large |
| Stronger policies by each country on reduction of CO2 emissions | Expenditure /Assets |
Need to upgrade to higher efficiency manufacturing equipment because of tighter energy conservation policies | Medium | ||
| Reputation | Changing consumer behaviors | Revenue | Expanding purchasing behavior considering environmental impacts due to climate change | Large | |
| Reputational changes among investors | Capital | Poorer reputation among investors and difficulty in capital procurement in case countermeasures against climate change are insufficient | Small | ||
| Physical risk | Chronic | Average temperature increase | Expenditure /Revenue |
Degrading quality of crops and declining yield | Large |
| Changing rainfall and weather patterns | Expenditure /Revenue |
Soaring raw ingredients prices caused by the negative impacts on crop production areas due to increased rainfall or drought | Large | ||
| Declining biodiversity | Expenditures | Difficulty pollinating crops due to fewer insects resulting in raw ingredients that cannot be procured | Large | ||
| Reduced production volume from the occurrence of pests | Expenditure /Revenue |
Declining crop yield and quality due to the proliferation of pests resulting in unstable procurement | Medium | ||
| Declining productivity of farmers | Expenditure /Revenue |
Declining labor productivity of farmers due to rising temperatures resulting in higher procurement costs | Small | ||
| Acute | Declining production yield caused by water stress | Expenditure /Revenue |
Difficulty procuring water due to water shortages causing higher prices | Large | |
| Growing intensity of extreme weather | Expenditure /Revenue |
Frequent occurrence of extreme weather including strong wind and rain causing damage to a number of production areas | Large | ||
Kagome Group's Risk Countermeasures and Opportunities
| Risk items | Risk response measures | Opportunities |
|---|---|---|
| Rising carbon prices | ●Achieve reduction targets (2030) for greenhouse gas emissions formulated for the Kagome Group to achieve net-zero greenhouse gas emissions by 2050 (energy conservation, energy creation and purchased energy) ●Reduce CO2 through collaboration with suppliers ●Formulate and implement measures to pass on cost to product prices |
|
| Changing consumer behaviors | ●Understand consumer purchasing behavior and undertake accurate marketing activities ●Actively develop environmentally friendly products and certified products |
●Develop and sell products based on needs during extreme weather |
| Rising average temperature | ●Address climate change with smart agriculture using data, etc. | ●Roll out sales globally of vegetable varieties that can withstand climate change |
| Changing rainfall and weather patterns | ●Acquire vegetable varieties that can withstand climate change (high temperature resistance and pest resistance) | |
| Declining biodiversity | ●Propose and promote agriculture in symbiosis with living organisms | ●Promote cultivation of tomatoes that do not require bee pollination on the farm |
| Declining production yield caused by water stress | ●Promote initiatives at plants to recycle and conserve water (membrane filtration, etc.) ●Develop and use tomato cultivation system that can produce tomatoes with the fewest amount of water ●Promote resource-recycling agriculture (use of plant effluent and rainwater for agriculture) |
●Globally expand tomato cultivation system that can produce tomatoes with the fewest amount of water |
| Growing intensity of extreme weather | ●Upgrade procurement strategy (review production areas and diversify) ●Develop systems that enable cultivation even in strong wind and rain ●Upgrade BCP measures (using climate change as scenario) |
●Transition to service business (toward a service business unaffected by changes in costs of goods) |
