Disclosure of Information on Climate Change
Disclosure Based on TCFD Recommendations
For a detailed scenario analysis, including responses to the new TCFD guidance for 2021, please see “Disclosure Based on TCFD Recommendations” in the 2022 Environmental Report.
- New TCFD guidance
Guidance on Metrics, Targets,and Transition Plans(October 2021) Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures(October 2021) https://www.fsb-tcfd.org/publications/
Business Impacts of Climate Change and Holistic Approach
The Kirin Group’s business, which generates value by utilizing ecosystem services, relies heavily on natural capital. As climate change becomes more severe due to greenhouse gases generated by business activities, the agricultural products and water that are the raw materials in Kirin’s business will be most affected. The containers and packaging required to deliver products also damage natural capital if we do not use appropriate container materials and reuse used containers. Based on these recognitions, we have been conducting a variety of risk surveys related to natural capital since around 2010, before the publication of the final TCFD recommendations. We are also taking a holistic approach with the understanding that material issues set out in our Environmental Vision—biological resources, water resources, containers and packaging, and climate change—are interrelated rather than independent issues.
Disclosure Framework
We started scenario analyses immediately after the publication of TCFD’s final recommendations in 2017 based on our many years of accumulated knowledge on the risk assessment of natural capital in the value chain and the impact of climate change, and were able to promptly disclose information in line with TCFD recommendations in the Kirin Group’s Environmental Report published at the end of June 2018.
Disclosure based on TCFD recommendations advanced scientific proof that climate change issues are closely linked to other environmental challenges, and reaffirmed the effectiveness of a holistic approach.
In this part, we explain how the Kirin Group assesses and analyzes the impacts of climate change and promotes transition strategies such as mitigation and adaptation in order to increase resilience to climate change and lead a decarbonized society, in accordance with the new guidance issued by the Task Force on Climate-related Financial Disclosures (TCFD) in October 2021.
Details are available in our Environmental Report and on our website.
Governance
Supervisory structure
At the Kirin Group, the Board supervises the execution of operations addressing environmental issues, such as climate change, natural capital, and a recycling-oriented society. The Board also deliberates and makes resolutions on basic policies and material matters related to these and other environmental issues.
Specifically, the Board at least once a year receives reports on and reviews strategies, action plans, and the status of progress of environmental management. These involve business risks and growth opportunities associated with environmental issues, including material risks identified in the course of risk management, and the results of scenario analyses.
Meanwhile, the Group Executive Committee deliberates and makes resolutions on material non-financial targets.
Excerpts from the 2022 Board reports (conducted twice)
February 21
- The Corporate Governance Code has been revised, and it is expected that the Board will “deepen discussions to actively and proactively address sustainability issues.” and strengthening governance is necessary
- To strengthen our internal structure, multiple Group CSV Committee meetings will be held, and each meeting will require reporting to the Board. A new Group Environmental Meeting will be established, and it will be added to the governance structure along with the existing Group Business and Human Rights Meeting
- To strengthen sustainability disclosure, we will disclose information in accordance with the new TCFD guidance and prepare for ISSB compliance
December 19
- ESG integration is becoming mainstream in corporate valuations, and companies won’t be valued by investors if they do not meet expectations for ESG compliance
- At a time when simultaneous disclosure of financial and non-financial information is required, accelerating the aggregation of non-financial information is a major challenge
- The Kirin Group is highly regarded for its progressive approach to TCFD and its trial disclosure under the TNFD, and will continue to take the lead in global disclosure initiatives
Executive structure
The Senior Executive Officer in charge of CSV Strategy is responsible for environmental issues, including climate change, and also chairs the Group Environmental Meeting. Since FY2021, we have continued to participate in the Ministry of Economy, Trade and Industry’s Study Group on Disclosure Policies for Non-financial Information, and have assisted in the making of rules for climate related financial disclosure.
The Group CSV Committee, which meets three times a year to discuss CSV issues, including environmental issues across the Kirin Group, is an advisory body to the President & CEO, which is chaired by President & CEO of Kirin Holdings and whose members consist of Presidents and CEOs of key Group companies and Senior Executive Officers of Kirin Holdings, submits any decisions it makes to the Board.
In 2022, we increased the number of meetings of the Group CSV Committee (from once a year to 3 times a year) and established a new Group Environmental Meeting (twice a year) under the Group CSV Committee.
| Committee | Chairperson | Committee Members | Main Agenda | Meeting Frequency |
| Group CSV Committee |
KH President |
|
|
3 times/year Of those, one held as a Group ESG Meeting |
|---|---|---|---|---|
| Group Environmental Meeting | Chief Officer in charge of CSV |
|
|
Twice/year |
Performance linkage
In view of the importance of environmental issues, including climate change, executive compensation is set to be linked to the performance evaluation of non-financial metrics (the Group’s Scope 1 + Scope 2 reduction targets, water consumption per unit at Lion production sites with high water stress, and recycling of PET bottles), one of the key management indicators in the Medium-Term Business Plan.
Environmental issues, including climate change, are included in the CSV commitment, one of the non-financial target for Group companies, and are reflected in their business plans and the performance evaluations of their top management.
Business Impact Assessment of Risks and Opportunities of Climate Change
Since 2017, continued scenario analyses have helped us improve our level of understanding and strategies for the risks and opportunities posed by climate change. In addition to our own manufacturing sites, we also analyze the yield of agricultural products, procurement costs, carbon pricing, etc. Businesses analyzed include Kirin Brewery, Kirin Beverage, Mercian, Lion, Kyowa Kirin, Kyowa Hakko Bio, and Koiwai Dairy Products, which account for approximately 90% of the Kirin Group’s sales.
Scenario analyses use group scenarios that combine temperature scenarios (RCP) and socioeconomic scenarios (SSP), such as those of the IPCC. It is necessary to take into account the fact that the impact estimates analyzed and calculated are subject to uncertainties in the research results, information, and data used. We will continue to reflect new research findings, information, and data to improve accuracy.
Financial impact
| Business Risks/Social Issues | Financial Impact | |
| Physical risks | Decline in yields of agricultural products | 2°C scenario: Approx. 0.9 billion yen to 2.5 billion yen (2050) |
|---|---|---|
| 4°C scenario: Approx. 2.5 billion yen to 9.7 billion yen (2050) | ||
| Shutdowns due to floods | Approx. 1 billion yen (once-in-200-year disaster, a total of 20 locations in Japan) | |
| Shutdowns due to droughts | Approx. 30 million to 0.6 billion yen | |
| Transition risks | Financial impact of carbon pricing on energy | 1.5°C scenario: Approx. 9.5 billion yen to 427 billion yen (2030) |
| 2°C scenario: Approx. 69 billion yen (2030) | ||
| 4°C scenario: Approx. 1 billion yen (2030) | ||
| Financial impact of carbon pricing on agricultural products*1 | RCP2.6/SSP1: Approx. 0.7 billion yen to 3.0 billion yen (2050) | |
| RCP8.5/SSP3: Approx. 1.6 billion yen to 5.7 billion yen (2050) | ||
| Business opportunities | Spread of infectious diseases | Immunity & health supplements market: Approx. 28,961.4 million USD (2030) |
| Increased heatstroke | Drinks for heatstroke market: Approx. 94 billion to 188 billion yen (2100, 4°C scenario) |
- If GHG emissions are not reduced.
- The financial impact of a decline in yields of agricultural products due to climate change and carbon pricing on agricultural products are assessed using the 25–75 percentile range of the distribution of forecast data for price fluctuations. Due to high uncertainty, estimates of carbon pricing under the 1.5°C scenario are included in the Environmental Report as reference values.
Analysis of impacts on assets
We estimated the impact of the sale of the Lion non-alcoholic beverages business in 2021 and the Myanmar business in 2023. There were no significant changes in the physical and transition risks, and although GHG emissions from the divested businesses were confirmed retroactively to the base year, we determined that there is no need to change targets.
The estimated exposure of assets in a typical once-in-200-year disaster (a total of 20 locations in Japan) is as follows. While we believe it is unlikely that boilers, delivery trucks, etc., will be forced out of service before they reach their end of life due to laws and regulations, we have disclosed the book values below for reference although they are not material.
Assets exposed to risk
| Items Subject to Analysis | Impact | |
| Impact of divestment | Before business divestment | 515 thousand tons CO2e |
|---|---|---|
| After divestment | 463 thousand tons CO2e | |
| Assets exposed to risk | Exposure | Approx. 1 billion yen |
| Residual value of related facilities | Approx. 1.1 billion yen |
Strategy
Considering the business characteristics of the Kirin Group, in order to sustainably create value, it is necessary to simultaneously respond to both the sustainable use of natural capital and increased resilience, as well as to minimize the challenges posed by climate change, containers, and packaging that impede this.
While the scenario analyses draw on multiple research findings and include different views, they generally indicate that climate change impacts on agricultural products and water are inevitable.
Although we have judged that there will be no major impact that will change the industrial structure, the impact will be considerable as a company that creates value through ecosystem services generated by natural capital. We believe that it is essential to continue to focus on reducing GHG emissions, making agricultural production areas sustainable, and addressing water risks and stresses.
We were also able to grasp social issues related to heat stroke and infectious diseases caused by climate change. We expect this can contribute to our business in the Health & Well-being domain, which the Kirin Group defines as a growth area.
| Significant Issues | Response Strategy | Progress | |
| Adaptation (Sustainable use of natural capital) |
Biological resources |
|
|
|---|---|---|---|
| Water resources |
|
||
| Mitigation (Minimizing impact on natural capital) |
Containers and packaging |
|
|
| Climate change |
|
|
|
| Business opportunities | Infectious diseases |
|
|
| Heatstroke |
|
|
Transition Plan
The Kirin Group has formulated a roadmap for achieving science-based GHG emission reduction targets and net zero targets in order to limit the global average temperature increase to 1.5°C compared to pre-industrial levels. The roadmap was discussed and resolved by the Executive Committee, and has been in operation since January 2022. We have also developed and implemented investment plans and funding measures in response to our roadmap. Exploration and trials will continue for Scope 3, starting with reduction measures in the packaging and agricultural domains. As for climate change adaptation measures, we will expand the promotion of sustainable agriculture and forestry. We also plan to participate in a pilot program for international initiatives to develop natural capital target setting methodologies and disclosure frameworks to lead rule making. The roadmap will be reviewed regularly and updated appropriately in light of scientific advances, regulations, and other factors.
Reducing Scope 1 and Scope 2 emissions
(Unit: thousand tons CO2e)
| 2021 | 2024 | 2030 | 2050 | |
| Kirin Brewery | 185 | 140 | 90 | 0 |
| Kirin Beverage | 40 | 37 | 20 | 0 |
| Mercian | 59 | 45 | 27 | 0 |
| Lion | 84 | 74 | 51 | 0 |
| Kyowa Kirin | 41 | 27 | 25 | 0 |
| Kyowa Hakko Bio | 201 | 165 | 109 | 0 |
Investment amounts
(Unit: hundred million yen)
| 2019-2021 MTBP | 2022-2024 MTBP | 2025-2027 MTBP | 2028-2030 MTBP | |
| Investment in/measures for energy conservation | 15 | 74 | 104 | 48 |
| Expansion of renewable energy | 15 | 150 | 237 | 362 |
| Energy transition | 0 | 0 | 9 | 12 |
| Total | 30 | 224 | 350 | 422 |
- Figures for MTBP from 2019 to 2021 are actual. The 2022-2023 plan was estimated at the time of planning the transition-linked loan and the figures may be revised.
- The investment value includes all cost related to install and procure the renewable energy.
Scope 1 + 2 emissions reductions
For Scope 1 and Scope 2 reductions, we will combine three approaches: promoting energy conservation, expanding renewable energy, and transitioning energy. Up to 2030, we will increase energy efficiency and reduce its use, transitioning the energy mix from fossil fuels to electricity and utilizing electricity made from renewable energy sources.
After 2030, in order to achieve net zero in 2050, it will be necessary to switch the combustion fuel used in the steam production process from fossil fuels to hydrogen and other fuels that do not emit GHG. Infrastructure development and technological innovations are necessary, so there is uncertainty about achieving these goals. We will take the initiative in taking on the challenges of practical application and engage in appropriate policy proposals and rule making.
Scope 3 emissions reduction
Of the categories defined in the GHG Protocol, we have identified the following categories as the areas of focus: Category 1 (manufacture of ingredients and materials) making up the largest proportion of the total emissions at approximately 60%, Category 4 (transport) making up the second largest proportion, and Category 9 (distribution). We will promote reductions through “encouragement of reduction at business partners” and “reducing our own independent emissions.”
Lion has also shown in pilot tests that it can raise Scope 3 reduction targets by pooling actual GHG emissions with suppliers and customers with a third party, without mutual disclosure. This approach has been published by Australia’s Climate Leaders Coalition as the Scope 3 Roadmap, which was presented by Lion’s CEO at COP27.
| Encouragement of reduction at business partners | We plan to reduce emissions with an emphasis on engagement based on the emissions reduction plan and the status of progress in both quantitative and qualitative terms at each company, obtained through questionnaires to major suppliers |
|---|---|
| Reduction of our own independent emissions | We will make containers and packaging lighter and raise the percentage of recycled resin in PET bottles by leveraging the competence of our own research institute to develop containers and packaging in-house |
Investment plan
Until 2030, our basic principle for environmental investment is profit and loss neutral. Specifically, we will offset increases in depreciation from investments and the cost of procuring renewable energy with cost benefits derived from energy saving. We use Net Present Value (NPV) as an indicator for environmental investments aimed mainly at reducing GHG emissions and have incorporated Internal Carbon Pricing (ICP: $63/tCO2e) into our framework for making investment decisions. We intend to accelerate the reduction of GHG emissions by reflecting ICP in the roadmap. In 2020, we issued green bonds (totaling 10 billion yen) to finance the procurement of recycled PET resin and the introduction of heat pump systems at plants. Then, in January 2023, we financed the projects related to energy saving and renewable energy, which we are promoting as part of initiatives to reduce Scope 1 and 2 GHG emissions, with a transition-linked loan (totaling 50 billion yen) for the first time as a food company in Japan. The loan is subject to the FY2022 subsidy for global warming countermeasures promotion project and the performance-linked interest subsidies program offered by the Ministry of Economy, Trade and Industry based on the Industrial Competitiveness Enhancement Act (financial support for promoting the transition towards achieving a carbon-neutral economy).
Risk Management
Climate change risks consist of two categories: physical risks and transition risks. Of these, areas producing raw materials and manufacturing sites are exposed to physical risks. Since 2013, the company has made various efforts to make its areas producing raw materials sustainable while accumulating knowledge on recovery from flood damage suffered by manufacturing facilities. To reduce GHG emissions, which is a significant transition risk, we are prioritizing the “additionality” of substantially increasing renewable energy and the “ethicality” of energy generation from the perspective of the environmental impact and human rights. We have promoted the installation of large-scale solar power generation at our plants and participation in the wind power generation business.
In addition, natural disasters of unprecedented scale and legal regulations that change the structure of industry are becoming a reality, and we believe that the approach of setting scenarios and analyzing and evaluating them is quite effective for risks that would have an extremely material impact on business if they occurred, regardless of the possibility of such events. We will apply this approach not only to climate change but also to other challenges to minimize risks and expand business opportunities.
Material risks, including those related to climate change, are managed by the Group Risk and Compliance Committee, which meets every quarter and is chaired by the Senior Executive Officer in charge of Risk Management. For the BCP, we have reviewed our traditional event-by-event approach and transitioned to an all-hazard approach to business continuity planning whereby we work out countermeasures with a focus on the loss of management resources, regardless of the event.
Metrics and Targets
| Response | Items | Targets | Results |
| Mitigation measures | GHG emissions reduction targets (relative values) | Net zero (2050) | 4,411 thousand tons CO2e |
|---|---|---|---|
| Scope1+2 | 50% reduction (in 2030 from 2019) | 13% reduction | |
| Scope 3 | 30% reduction (in 2030 from 2019) | 722 thousand tons CO2e | |
| Percentage of renewable energy in total energy consumption | 100% (2040) | 17% | |
| Adaptation measures | Number of small farms that received training for the acquisition of certification in Sri Lanka | 10,000 farms (2025) | 2,120 farms |
| Ratio of certified palm oil in Japan | Maintain 100% | 100% | |
| Lion water efficiency* | Less than 2.4 kl/kl (2025) | 3.8kl/kl | |
| Kyowa Hakko Bio water consumption | 32% reduction (in 2030 from 2015) | 52% reduction from 2015 | |
| Ratio of FSC-certified paper container used in the Japan Non-Alcoholic Beverages Businesses | Maintain 100% | 100% | |
| Proportion of recycled materials used in PET bottles in Japan | 50% (2027) | 4.9% |
- Tooheys Brewery, Castlemaine Perkins Brewery, James Boag Brewery, Pride