Tackling climate change -- Initiatives based on TCFD recommendations and the challenge to achieve carbon neutrality --
Nihon Parkerizing announced its support for the Task Force on Climate-related Financial Disclosures (TCFD) recommendations in January 2024 and has joined the TCFD consortium, composed of companies and financial institutions that support the recommendations. We will fulfill our accountability to stakeholders regarding the status of our response to climate change through information disclosure based on the TCFD framework. We will also take appropriate measures according to the business and financial impact assessed from the risks and opportunities identified through the climate change scenario analysis.
Governance
In response to society’s increasing demands and expectations for companies to realize a sustainable society, we pursue sustainable growth and strive to balance economic and social value in line with our management philosophy. In July 2023, we established the Sustainability Committee to further our actions to address sustainability challenges, including climate change.
This committee meets quarterly to discuss the following agenda.
• Results of scenario analyses based on the TCFD recommendations
• Measures to address climate-related issues
• Setting qualitative and quantitative targets related to sustainability and evaluating their progress
The committee submits reports regarding its deliberations to the Executive Board and the Board of Directors in a timely manner at least once a year. The Board of Directors oversees all of the company’s sustainability activities and promotes actions to fulfill our corporate responsibilities.
The Sustainability Committee meeting record: August 2024 and January, April and June 2025
Strategies
Based on short-, medium-, and long-term time perspectives, we have assessed and identified risks and opportunities that we estimated would have a significant impact on our business, from among transition risks attributed to policies, regulations, and market changes that climate change will bring to the value chain, as well as physical risks such as extreme weather events, according to the risk and opportunity assessment process that we have established. In addition, we have conducted a scenario analysis of how our business environment could have changed in 2030 from a long-term perspective, given the unique nature of the issue of climate change. In the scenario analysis, we referenced multiple existing scenarios published by the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC). We assumed three scenarios: the below 1.5 °C scenario, the below 2 °C scenario, which assumes that decarbonization has accelerated, and the 4 °C scenario, where the temperature will rise most sharply. The risks and opportunities expected to impact the business significantly were identified as follows, and we quantified the financial impact in 2030 to the extent possible.
*Transition risk: IEA NZE, IEA APS, IEA STEPS Physical risk: SSP1-1.9, SSP1-2.6, SSP5-8.5
Scenario Analysis
Below 1.5°C Scenario
| Type of risk/opportunity | Impact on business | Period | Overall evaluation | Remedies | |
|---|---|---|---|---|---|
| Risks | Policy and legal regulations |
Introduction of a carbon tax and tightening of regulations on emissions | Medium to long term | Medium | Promotion of energy saving measures Introduction of renewable energy/in progress throughout our group Photovoltaic power generation systems for in-house consumption/under consideration |
| Raw material procurement | Difficulty in procurement due to environmental regulations | Medium to long term | Medium | Promoting multi-sourcing/shift to multi-sourcing | |
| New markets | Decarbonization-related demand from customers | Medium to long term | High | Development of environmentally friendly products CFP calculation/handled on a project basis |
|
| Technical response | Responding to customers’ technological innovations | Medium to long term | High | Strengthening technological development and customer cooperation | |
| Increase in natural disasters | Difficulty in the procurement of scarce resources | Short to long term | Low | Enhancing supplier engagement Promoting multi-sourcing |
|
| Opportunities | Products and services |
Increase in demand for environmentally friendly products. | Medium to long term | High | New product development Customization |
| Market changes | Expansion of the decarbonization market | Medium to long term | High | Development of a new business field | |
4°C scenario
| Type of risk/opportunity | Impact on business | Period | Overall evaluation | Remedies | |
|---|---|---|---|---|---|
| Risks | Natural disasters | Shutdowns due to typhoons, floods and other disasters | Medium to long term | Small to medium | Strengthening of BCP Deployment of bases Disaster Response drills |
| Raw materials | Concerns about the supply of rare resources | Medium to long term | Small to medium | Diversification of suppliers Study on alternative materials |
|
| Opportunities | Disaster prevention and mitigation | Increased demand for disaster response technologies and products | Medium to long term | Medium | Product development for disaster prevention infrastructure |
| Resilience | Demand for supply chain strengthening | Medium to long term | Medium | Supporting the development of a stable supply system | |
Key strategies based on the below 1.5°C scenario
Strategy 1
Response to decarbonization measures
We estimate that the carbon emissions from business activities will increase as the business grows unless we take steps to prevent them. When carbon taxes are introduced, their impact on our operating income could be hundreds of millions of yen. To address these risks, we set a target to reduce CO2 emissions per unit of sales (Scope 1 and 2) by 30% compared to FY2020 by 2030. In addition, we have been discussing energy-saving activities across our group.
Strategy 2
Addressing raw material procurement risks
We anticipate that new raw materials may be required due to environmental regulations. If it is difficult to procure raw materials, the impact on operating income could exceed JPY one billion. To address the risks, we have set “taking responsibility for creating a sustainable society” as one of our key issues and encourage the use of alternative raw materials and the adoption of alternative products, in addition to establishing a stable supply system in cooperation with suppliers.
Strategy 3
Decarbonization measures
Customer demand for decarbonization is increasing. Failure to meet this demand could result in a decrease in orders and the loss of billions of yen in operating income. As we have set forth "developing new products and technology that are environmentally friendly" and "contributing to reducing the environmental load" as our key issues (materiality), we will work to reduce the environmental impact of our customer's manufacturing processes and promote carbon footprint (CFP) calculation for each product and service to visualize CO2 emissions, thus indeed driving measures to address this risk.
Strategy 4
Serving new markets
The movement toward carbon neutrality is accelerating worldwide, with the rapid expansion of decarbonization markets and the development of innovative technologies required in these markets. As we have set "developing new fields making the most of surface modification technologies" as one of our key issues (materiality), we will actively develop products for new markets based on the proprietary surface modification technologies we have cultivated over many years as a leading company.
Risk management
System for the management of climate-related risks
Our Sustainability Committee identifies and assesses climate-related risks, while the Risk Management Committee handles other business risks. The Sustainability Committee identifies critical risks and opportunities and assesses their impact using scenario analyses aligned with the TCFD recommendations. Risks are assessed on a four-point scale for their impact (on an operating income basis) and likelihood of occurrence (frequency). Overall, they are rated on a 16-point scale for their importance. Based on this, we prioritize risks and determine measures based on their relative relationships.
Climate-related risk management process
We plan, implement, manage, and improve measures to address business risks based on their importance. Our environmental strategy reflects climate-related transition risks and opportunities, and we have incorporated them into our targets and plans. We implement a plan-do-check-act (PDCA) cycle to improve our environmental performance and risk management.
Integration with comprehensive risk management
Our group has established its Risk Management Committee to effectively manage risks that may hinder the achievement of its business objectives, discuss assessments and measures with a focus on management risks and submit reports on these matters to the Internal Governance Committee. The Sustainability Committee leads the handling of climate change-related risks, and the two committees work closely and cooperatively on group-wide risk management.
Metrics and targets
We have set a target to reduce our GHG emissions (Scopes 1 and 2) by 30% from the FY2020 level by FY2030. We calculated our non-consolidated GHG emissions in the fiscal year ended March 2025. According to this calculation, we have exceeded our target, achieving a 33% reduction through initiatives such as introducing renewable energy and promoting energy-saving activities. We will set a GHG emissions reduction target for our domestic and overseas consolidated subsidiaries, and our group will strive to achieve carbon neutrality.
Scope 1, 2, and 3 GHG emissions
To ensure the transparency and reliability of the disclosed GHG (greenhouse gas) emissions, we received assurance from an external organization (SOCOTEC Certification Japan) as a third party.
FY2022 Independent Assurance Report