TCFD - work to understand and disclose the impact
In November 2019, the azbil Group endorsed the recommendations by the Task Force on Climate-related Financial Disclosures (TCFD) to gain an accurate understanding of the impact of climate change on business activities and disclose that impact. After this announcement, evaluations of each of our businesses’ opportunities and risks, based on a scenario where global temperatures are rising, indicate that the opportunities for business activities that contribute to reducing CO2 greatly outweigh the risks. We disclose our governance, strategies, risk management, metrics and targets related to climate change as follows.
Governance
The azbil Group recognizes that climate change is one of the top priorities in practicing the Group philosophy, and a cross-Group task force led by a designated officer was formed to deliberate on the business and financial impact of climate change in the Management Meeting under the supervision of the Board of Directors.
Strategy
Based on information from the Intergovernmental Panel on Climate Change (IPCC), the International Energy Agency (IEA) and other organizations, we have identified the long-term business risks and opportunities for the azbil Group until 2030 according to a 1.5/2℃ scenario*1and a 4℃ scenario.*2 We understand the 1.5°C scenario to have the same opportunity and risk trends as the 2°C scenario, but with a greater degree of impact.
*1 This scenario assumes that temperature rise is contained within a sustainable range due to the implementation of stricter regulations and the introduction of technological innovations aimed at a decarbonized society.
*2 This scenario assumes that no effective measures to reduce greenhouse gas (GHG) emissions are implemented, resulting in continued temperature rise and an increase in abnormal weather and natural disasters.
Disclosure of opportunities and risks
| Type | Scenario | Building Automation (BA) business | Advanced Automation (AA) business | Life Automation (LA) business |
|---|---|---|---|---|
| Opportunity | 1.5/2℃ | Expanding demand for energysaving and CO2-reducing solutions and services that meet global needs | Increased demand for solutions, and sensors and other measuring instruments designed for new industries and processes that reduce the effect on the environment | Increased SMaaS business for gas meters using IoT technologies |
| Opportunity | 4℃ | Increased demand for products, services, and solutions that enable buildings to adapt to climate-related disasters | Increased demand for products, services, and solutions that offer anomaly prediction functions | Increased demand for products, services, and solutions adapted to handle climate-related disasters |
| Migration risk |
1.5/2℃ | (Shared by all core businesses)
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| Physical risk |
4℃ | (Shared by all core businesses)
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Impact of opportunities and risks on azbil Group financial plans, and countermeasures
At this stage, we recognize that there are more opportunities than risks, as reduction of CO2 emissions significantly outweighs CO2 emissions from azbil Group business activities.
We have divided risks into physical risks and migration risks and are analyzing their impacts on finances. Although we estimate physical risks based on a number of assumptions, we believe their impact on business is limited due to the countermeasures we have put in place such as decentralizing our production network and formulating BCPs. For migration risks, we have formulated the 2030 Greenhouse Gas (GHG) Emission Reduction Targets based on SBTs to gradually reduce our GHG emissions, and we are putting systematic risk reduction measures in place. Emissions from the azbil Group’s own business activities (scopes 1+2) were approximately 0.017 million metric tons, a figure that is roughly 1/170 of the 2.76 million metric tons of effective CO2 reduction at our customers’ sites,*1 a relatively low level. Even with the rise in future carbon prices and increase in burden of 5,000 to 10,000 yen per ton taken into account, the total financial burden should be around 100 to 200 million yen. However, after a quantitative evaluation of the impact on the azbil Group’s business in 2030 in the hypothetical 1.5/2℃ scenario, we expect it will lead to effective reduction of CO2 at customers’ sites and the expansion of new energy markets. We therefore estimated the contribution to the increase in sales to be at least on the scale of about 12 billion yen per year.
Building Automation (BA) business: approx. 7 billion yen
Due to the increased installation of related equipment and the increased installation of high-efficiency equipment caused by the spread of renewable energy sources and the increase in electricity fees, we assumed an increase in demand for existing businesses related to energy conservation such as our total energy management service (TEMS). We also assumed an expansion in business opportunities for one-stop services that combine energy procurement and emissions-related transactions (such as from renewable energy sources) with energy management systems (EMS) that centrally manage everything from the visualization of CO2 emissions to carbon offsets. Our estimates are based on a scenario with certain assumptions as well as past installation histories and customer needs in the hospital and hotel market, where energy use is high.
Advanced Automation (AA) business: approx. 5 billion yen
We assumed an increase in business opportunities related to markets that contribute to carbon neutrality (hydrogen, CO2-free ammonia, carbon recycling / CCUS*2). Our estimates are based on a scenario with certain assumptions such as trends and past installations in the target market and information on the target market’s growth rate from third-party research organizations.
※1 Effective CO2 reduction is estimated by the difference between adopting and not adopting azbil Group products, services, and solutions at customers’ sites
※2 Carbon dioxide Capture, Utilization and Storage
To control risks and expand business opportunities, the azbil Group encourages the reduction of the environmental impact of our business activities while pursuing environmental preservation through our core businesses by harnessing the technologies and expertise accumulated through those initiatives and utilizing our measurement and control technologies to help customers solve their environmental issues, which will lead to the realization of a sustainable society.
Main initiatives in FY2022 to control the risks
- Initiated procurement of 100% renewable electricity for Shonan Factory and Hadano Distribution Center
- Introduced solar power generation at the Wakayama Factory of Azbil Kimmon Energy Products Co., Ltd. and Azbil Taishin
Solar power generation facilities at the Wakayama Factory
Main initiatives in FY2022 to expand the opportunities
- Established the GX Solution Department as a new organization to lead green transformation (GX) on a company-wide basis
- Endorsed and invested in Japan Green Investment Corp. for Carbon Neutrality, a public-private fund
- Invested in Clean Energy Connect Inc. through a thirdparty allotment of new shares and formed a business alliance agreement with the company
- Launched an energy service provider business, which contributes to our customers’ efforts to become carbon neutral
Risk Management
The azbil Group works to comprehensively identify risks that may have a significant impact on operations, including those connected to climate change. Deliberations are held in the form of a workshop by management at the azbil Group General Risk Committee, to identify risks deemed important to the azbil Group and also departmental management risks. The selected risks are submitted to the Board of Directors for deliberation and final decision. Once the risks are identified, at the beginning of the fiscal year, we formulate an annual risk response plan and report the progress of the plan at the azbil Group General Risk Committee and other meetings held during and at the end of the fiscal year. Through this process, we continuously recognize and address any delays in or challenges to implementation of the plan, following the PDCA cycle.
Indicators and Goals
We promote efforts to combat climate change through our business activities which contribute “in series” to the achievement of a sustainable society, by considering indicators and goals that take into account all azbil Group customers, the Group itself, and its entire supply chain.
- We aim to increase the effective reduction CO2 at our customers’ sites to 3.40 million metric tons by FY2030.
- We have formulated the azbil Group’s 2050 Long-Term Implementation of the 2050 Long-term Vision for Reducing GHG Emissions in order to reduce GHG emissions from our business activities (scopes 1+2) to substantially zero emissions by 2050 with the ultimate aim of achieving a carbon-neutral society. To achieve this long-term vision, we have set medium-term 2030 Targets for Reducing GHG Emissions for our business activities, and we are working on measures to cut CO2 emissions across our entire supply chain.
2030 Targets for Reducing GHG Emissions
- GHG emissions from business activities (scopes 1+2): 55% reduction (2017 base year)
- GHG emissions across the entire supply chain (scope 3): 20% reduction (2017 base year)