Climate Change

Policy and Basic Concept

Recommendations by the Taskforce on Climate-related Financial Disclosures (TCFD) in June 2017 encourage companies to effectively disclose climate-related financial information with consistency, comparability, reliability and clarity to promote appropriate investment decisions by investors. This comes from the observation that climate change related risks and opportunities will increase in the future.
We will utilize these recommendations as indicators to verify our response to climate change.
These recommendations include those that are still being debated and those that require a long-term response. Nevertheless, it is our policy to continue making disclosures about the efforts we tackle as they happen.

Main Climate Change Related Risks and Opportunities
Risk Opportunity

Transition risk

  • Reduction in demand for fossil fuels due to business restrictions on greenhouse gas emissions

Physical risk

  • Damage to business due to the increase in abnormal weather (e.g., droughts, flooding, typhoons and hurricanes)
  • Increase in renewable energy and other business opportunities which will contribute to alleviating climate change
  • Retention and acquisition of customers by strengthening supply structures that can adapt to abnormal weather

Targets

  • Targets for electricity consumption are here.
  • In overall power generation business, we aim to achieve a renewable energy ratio more than 20% (gross capacity basis) by FYE 2031 and will reflect this to the future strategy.

Realty business: Energy Consumption, Greenhouse Gas Emissions, and Water Usage

Advance Residence Investment Corporation ("ADR") , an ITOCHU group company, is one of Japan's largest real estate investment trusts (J-REIT) specializing in rental housing. In addition, ADR takes full advantage of the collaboration with ITOCHU Group and acquires and operates some of the rental apartments developed and managed by the group.
ADIM has established a Sustainability Policy consisting of six items, namely (1) Establishing organization-wide structure for compliance and risk management, (2) Reduction of energy consumption and CO2 emissions, (3) Resource conservation and reduction of waste, (4) Employee education, (5) Stakeholder engagement, and (6) Transparent disclosures. By implementing these things in its general asset management operations, the company contributes to the achievement of a sustainable society.
It has also established policies on energy conservation, greenhouse gas emission reduction, water conservation and waste management to improve the energy efficiency of ADR's properties and is working to reduce the properties' energy consumption and greenhouse gas emissions in order to put the Sustainability Policy into practice. The target is to reduce energy consumption and greenhouse gas emissions by an average consumption rate of 1% annually throughout the entire portfolio of more than 20,000 properties in the medium to long term.

Item Reduction target Short-term target Long-term target
Energy consumption

1%

Annual consumption rate basis

5 years (FYE 2015-FYE 2019)/5% reduction on consumption rate basis

Greenhouse gas (CO2) emissions

1%*

5 years (FYE 2015-FYE 2019)/5% reduction on consumption rate basis

  • Target reduction for both Scope 1 and Scope 2 is 1%.

Structures and Systems

The Sustainability Management Department plans and formulates climate change measures in ITOCHU. These measures are then carried out by the ESG officers and managers in each unit in Japan and overseas under the decision of the Chief Administrative Officer - the official in charge of these. The Sustainability Committee, one of the company's key committees, holds deliberations and makes decisions concerning policy formulation and important matters. In addition to a role in heading the Sustainability Committee, the committee's chair joins meetings of the Board of Directors, the HMC and the Investment Consultative Committee, and also engages in decision-making based on the company's impact on the environment and society by reporting regularly to the Board of Directors to brief them on our promotion of sustainability. We furthermore engage in dialog with stakeholders within and outside the company. One example of this is our regularly convened advisory board. This dialog provides an understanding of what society expects of and desires from the company, which we can then apply to our efforts at advancing sustainability.

[Fig]

Scenario Analysis

We have begun analyses and business impact assessments using multiple scenarios (including the International Energy Agency's 2℃ scenario*) based on suggestions made by the Task Force on Climate-related Financial Disclosures (TCFD). We are starting with our coal-related businesses which, out of all the businesses ITOCHU is engaged in, are in an industrial sector likely to be more heavily impacted in the event that greenhouse gas emission regulations are tightened around the world. They also have a greater financial impact on our company. Along with assessing materiality of climate-related risks and opportunities, we are identifying the variables with the greatest impact, primarily in terms of transition risk, and using a financial model that reflects the contracts and terms such as quality by business to analyze the optimal portfolio.

  • IEA (International Energy Agency) Sustainable Development Scenario, 450 Scenario, ETP2016 2℃ Scenario

Our understanding of the medium- to long-term business environment for the coal mining business and the power generation business, including coal-fired power, and our policy commitments are provided below. We have established the policy based on our understanding of the business environment under both the 4℃ scenario*, which the greenhouse gas reduction efforts of each country are on pace to achieve, and the 2℃ scenario, and will increase the tolerance of our businesses by ensuring proper measures for each scenario.

  • Refer to IEA New Policy Scenario, ETP2016 4℃ scenario, etc.

Coal business

Business environment under 4℃ scenario Business environment under 2℃ scenario
[Fig]
[Fig]

Under the 2℃ scenario, use of fossil fuels will be reduced as a result of technological innovation and changes in regulatory trends, but demand for high-grade coal, which has a relatively lower environmental impact, will remain at a certain level, and effective utilization of CO2 will be promoted. Our analysis shows that our high-grade thermal coal mining business can maintain its competitiveness.

Policy and efforts
  • We will not acquire new thermal coal mining interest.
  • Regarding the existing thermal coal mining projects, we will continue to review it and contribute to the development of a sustainable society while responding to the social demands of stable supply of energy to domestic and overseas customers.
  • We will continue to be involved in development of technologies to contribute to reduction of greenhouse gas emissions, including carbon capture and storage (CCS) and carbon capture and utilization (CCU).

Power generation business

Business environment under 4℃ scenario Business environment under 2℃ scenario
[Fig]
[Fig]

Under both the 2℃ and the 4℃ scenarios, we will maintain at least the current level of income.
Under the 2℃ scenario, we can maintain and grow revenue by increasing the number of new renewable energy plants.

Policy and efforts
  • We aim to achieve a renewable energy ratio more than 20% (gross capacity basis) by FYE 2031 and will reflect this to the future strategy.
  • We will not develop any new coal-fired power generation business, in part to contribute to the development of a sustainable society.

Future efforts

In the future, we will select scenarios to verify the impact of climate change on our overall business, identify sectors most heavily impacted, and review the businesses that require action along with the priority and specific guidelines for action.

Efforts

Among the environmental conservation costs disclosed in the environmental accounting, associated with climate change are as follows:

  • Depreciation costs for solar panels 7,689 thousand yen
    Administrative costs of the power generator installed in the Tokyo Headquarters 1,770 thousand yen
  • Research and development expenses for climate change risk aversion (donation to Division of Climate System Research, Atmosphere and Ocean Research Institute, the University of Tokyo) 500 thousand yen

We are aiming to develop new production areas to follow on from the Philippines in our fruits and vegetables business by FYE 2021. This will allow us to stably supply agricultural produce by reducing the impact on our business due to abnormal weather.

Toward Sustainable Plantation Operation in Response to Climate Change

[Photo]
[Photo]
Banana Field

We acquired the Asian fruits and vegetables business and processed foods business, which supplies canned food and beverages around the world, from Dole Food Company in the U.S. in April 2013.

Since this acquisition, typhoons, drought, and damage from disease and harmful insects have struck the Philippines — the largest production base of major products. The production volume of bananas was 440,000 tons in FYE 2017; this was a 40% decrease compared with before the acquisition. We looked to restore and expand this production volume. To that end, we introduced irrigation facilities for bananas. We also aggregated and expanded farmland and took measures against damage from disease and harmful insects. In addition, we invested in facilities for plantations and reviewed cultivation methods for pineapples to improve productivity. We are also promoting the diversification of production areas to prepare for the risk of unpredictable weather. Furthermore, we have improved management (e.g., the selection and concentration of businesses and products, and the disposal of unprofitable businesses).
In the future, we will aim to become the largest agricultural produce integrator in Asia by FYE 2021. We will achieve this by developing a structure to increase production to 800,000 tons of bananas and 1 million tons of pineapples in the Philippines. We believe that people, the environment and society are important resources for the survival and development of the company. Accordingly, DOLE again focused efforts on activities to contribute to local societies in the Philippines, Thailand, Japan, South Korea, China, North America and other countries in FYE 2018. For example, we spent approximately 3.2 million dollars to donate textbooks, desks, chairs and PCs to schools in various areas, construct and maintain school buildings, provide scholarships, and supply educational opportunities for children with disabilities. We also provided daily necessities and medical assistance to areas affected by natural disasters, donated blood, held hygiene education and provided food assistance to work on maintaining and promoting health.

Utilization of Solar Power Generation in a Joint Venture with Teys in Australia

Teys Australia Condamine introduced 1,034 solar panels in 2015. This has made it possible to generate approximately 506,000 kWh of power annually. Accordingly, approximately 50% of the power used in this facility comes from renewable energy. The introduction of solar power generation has reduced CO2 emissions by approximately 395 tons. Consequently, a reduction in CO2 emissions of approximately 49% has been realized compared with before the introduction of solar power generation.
We also procure beef to be slaughtered and processed from Teys — our joint investment partner in Australia. This firm has formed sustainable operations. It extracts methane gas generated in the slaughter process and reuses it as heat for its factory.

Cooperation with Stakeholders

Initiative Participation (Activities Through Financial and Industry Groups)

We are participating in the Global Environment Subcommittee of the Committee on Environment and Safety — an environment and energy related committee of the Japan Business Federation (Keidanren). We are working to realize an environmental policy compatible with the economy (e.g., through promotion of voluntary action plans, and measures for global warming, waste and recycling and environmental risks). We are also participating in the Global Environment Committee of the Japan Foreign Trade Council. We are striving to build a low-carbon society, construct a recycling-orientated society, and to support environmental related laws and regulations.

If we decide the direction regarding such as climate change in various industry groups we participate, we express an opinion in line with our Basic Policy on Sustainability in the decision process, and when it is different from our policy, we will strive to be in line with our policy.

Performance Data

The scope of the data except Carbon Dioxide Emissions from Distribution and Realty business : Energy Consumption, Greenhouse Gas Emissions is here.

Energy Consumption

Energy Consumption

Energy Consumption in the Japanese Bases of ITOCHU
  FYE 2016 FYE 2017 FYE 2018 FYE 2019
Purchased and consumed non-renewable fuel (Unit:MWh)

805

765

610

525

Purchased non-renewable power (Unit:MWh)

25,955

30,282

29,558

29,306

Other purchased non-renewable energy (e.g., steam, heat and cooling water) (Unit:MWh)

11,286

8,299

8,206

7,605

Generated renewable energy (solar power generation) (Unit:MWh)

87

58

58

51

Energy consumption cost total (Unit:million yen)

580

564

576

404

Energy Consumption Attributable to Business Facilities

(Unit:GJ)

  FYE 2016 FYE 2017 FYE 2018 FYE 2019
Tokyo headquarters

129,084

134,076

130,977

127,824

  • The figures for the Tokyo Headquarters are calculated based on the Tokyo Metropolitan Ordinance on Environmental Preservation.

Electricity Consumption

Our electricity consumption and CO2 emissions attributable to business facilities in FYE 2016 to FYE 2019 are as follows. We have been introducing energy saving facilities (e.g., air conditioner inverters and desktop LED stands). At the same time, all employees are switching off unnecessary lighting and office machines. We also started a trial of a morning-focused working system for regular employees working in headquarters and branch offices in Japan from October 2013. The formal introduction of this in May 2014 has led to a reduction in our electricity consumption.

(Unit:Thousand kWh)

  FYE 2016 FYE 2017 FYE 2018 FYE 2019
Tokyo headquarters

9,169

9,331

9,200

9,178

Osaka headquarters

442

434

409

396

Branches in Japan

326

291

292

295

Other branches and business facilities in Japan

1,300

1,270

1,184

1,145

Total of domestic bases of ITOCHU corporation★

11,237

11,326

11,084

11,014

Group companies in Japan

484,755

471,432

620,621

To be calculated

Overseas offices

3,424

3,087

2,224

To be calculated

Overseas group companies

147,665

143,485

500,777

To be calculated

Grand total of ITOCHU Group◆

647,081

629,329

1,134,705

To be calculated

  • This data has been calculated based on the Ordinance on Environmental Preservation for the Tokyo Headquarters and based on the Act on the Rational Use of Energy for the Osaka Headquarters, branches in Japan, other branches and business facilities. However, companies expected to be sold within the next five years held for investment management purposes are not included in the scope of the data. Moreover, the CO2 emissions of non-manufacturing site offices with 10 or fewer employees are quantitatively insignificant. Accordingly, they are not included in the scope of the data.
CO2 Emissions Per MWh of Electricity Consumption

(Unit:t-CO2/MWh)

  FYE 2017 FYE 2018
Grand total of ITOCHU group

0.524

0.506

Solar Power Generation

ITOCHU has installed solar panels on the roof of our Tokyo Headquarters and the roof of the adjacent CI PLAZA. These panels started generating power in March 2010. The power generation capacity of the solar panels installed is a total of 100 kW. This is equivalent to the power for 30 regular houses (calculated at approximately 3.0 kW per house). All the clean energy generated is used in our Tokyo Headquarters. This is equivalent to an amount of power used in lighting 3.5 floors in our Tokyo Headquarters (during instantaneous maximum power generation).

Greenhouse Gas (GHG) Emissions

ITOCHU sets target values for a reduction in our electricity consumption and in the volume of waste we discard, the promotion of recycling, and a reduction in our paper and water consumption. The target values are as below. ITOCHU alone and our consolidated subsidiaries as a whole have set a target of reducing our energy consumption by at least 1% on average annually at our output level. We are working to reduce our GHG emissions.

  FYE 2019 (Results) Single Year Target Target for the Fiscal Year Ending March 31, 2021
Electricity consumption in our Tokyo and Osaka Headquarters, branches in Japan, other branches and business facilities

Reduction of 0.6% compared to FYE 2018

Reduction by an average of at least 1% a year

Reduction of 30% compared to FYE 2011

Reduction of 43% compared to FYE 2011

Volume of waste discarded by our Tokyo Headquarters

Reduction of 35% compared to FYE 2011

Reduction of 10% compared to FYE 2011

Reduction of 20% compared to FYE 2011

Recycling rate in our Tokyo Headquarters

93%

90%

90%

Paper consumption in our Tokyo Headquarters

Reduction of 16% compared to FYE 2011

Reduction of 3% compared to FYE 2011

Reduction of 3% compared to FYE 2011

Water consumption in our Tokyo Headquarters (water supply)

Reduction of 14.1% compared to FYE 2011

Reduction of 10% compared to FYE 2011

Reduction of 15% compared to FYE 2011

CO2 Emissions Attributable to Business Facilities

(Unit:t-CO2)

FYE 2019 Scope 1 Scope 2
Total of all Japanese bases in ITOCHU★

91

6,969

(Unit:t-CO2)

FYE 2018 Scope 1 Scope 2
ITOCHU Group◆

1,540,041

610,644

(Unit:t-CO2)

  FYE 2016 FYE 2017 FYE 2018 FYE 2019
Tokyo headquarters

6,229

6,459

6,307

6,168

Osaka headquarters

235

221

208

172

Branches in Japan

208

180

175

170

Other branches and business facilities in Japan

664

641

582

550

Total of domestic bases of ITOCHU corporation★

7,336

7,501

7,273

7,061

Intensity figures per employee (Total of domestic bases of ITOCHU corporation)

1.714

1.737

1.660

1.622

Intensity figures per one square meter of all floor space (Total of domestic bases of ITOCHU corporation)

0.063

0.064

0.063

0.061

Group companies in Japan

369,775

340,559

1,186,179

To be calculated

Overseas offices

1,907

2,238

1,674

To be calculated

Overseas group companies

102,372

98,427

955,559

To be calculated

Grand total of ITOCHU Group◆

481,389

448,725

2,150,685

To be calculated

  • The data has been calculated based on the Tokyo Metropolitan Ordinance on Environmental Preservation for the Tokyo Headquarters and based on the Act on the Rational Use of Energy and the Act on Promotion of Global Warming Countermeasures for the Osaka Headquarters, branches in Japan, other branches and business facilities and group companies in Japan. (We have calculated this data by employing the actual emissions coefficients of the power companies we use.)
  • The data has been calculated based on the CO2 conversion coefficient according to the average value from 2010 to 2012 by country of the International Energy Agency (IEA) for overseas offices and overseas group companies.
  • The denominators of Intensity figures per one square meter of all floor space are as follows:
    FYE 2016 116,585m2, FYE 2017 116,528m2, FYE 2018 115,905m2,FYE 2019 115,842m2

Efforts Toward Environmental Distribution

ITOCHU is engaged in green distribution to reduce our environmental impact. This is to comply with the Act on the Rational Use of Energy (Energy Conservation Law).

Carbon Dioxide Emissions from Distribution

The carbon dioxide emissions generated due to contracted transport as shippers of ITOCHU is as follows.

CO2 Emissions Attributable to Distribution★
[図表]
  • This is independently assured through KPMG AZSA Sustainability Co., Ltd. This assurance conforms to the International Standard on Assurance Engagements (ISAE) 3000 and 3410 of the International Auditing and Assurance Standards Board.

Energy Saving Measures for Distribution

We have established a company-wide common energy saving measures policy as below in regards to energy saving measures for distribution. On top of that, we have formulated concrete measures for each division company.

Transportation method selection

Promotion of the use of railroads and domestic shipping

Measures to improve transportation efficiency

Use of transportation with the freight of multiple shippers on one vehicle and mixed loading
Selection of appropriate vehicle types
Increase in the size of vehicles
Optimal transportation routes
Improvement in the loading ratio

Cooperation with freight transportation operators and recipients of freight

Review of transportation plans and frequency

Concrete Measures
  1. Transportation Method Selection
    • We will survey and analyze the conditions of long-distance truck transportation. We will then consider a change to the transportation method from business that can be switched to railroad and domestic shipping transportation that has a relatively low environmental impact.
  2. Measures to Improve Transportation Efficiency
    • We will survey the conditions of transportation. We will then consider the selection of appropriate vehicle types and the selection of appropriate transportation routes to further improve loading efficiency and to reduce the energy consumption rate.
  3. Cooperation with Freight Transportation Operators and Recipients of Freight
    • We have decided to check the efforts toward environmental distribution with internal criterion concerning the appointment of distribution companies. We recommend the appointment of certified companies.
    • We are building a cooperative system together with our suppliers in addition to distribution companies to realize (1) and (2) above.

Realty business : Energy Consumption, Greenhouse Gas Emissions

ADIM has established a Sustainability Policy consisting of six items, namely (1) Establishing organization-wide structure for compliance and risk management, (2) Reduction of energy consumption and CO2 emissions, (3) Resource conservation and reduction of waste, (4) Employee education, (5) Stakeholder engagement, and (6) Transparent disclosures. By implementing these things in its general asset management operations, the company contributes to the achievement of a sustainable society.
It has also established policies on energy conservation, greenhouse gas emission reduction, water conservation and waste management to improve the energy efficiency of ADR’s properties and is working to reduce the properties’ energy consumption and greenhouse gas emissions in order to put the Sustainability Policy into practice. The target is to reduce energy consumption and greenhouse gas emissions by an average consumption rate of 1% annually throughout the entire portfolio of more than 20,000 properties in the medium to long term.

Item Breakdown Unit FYE 2015 (Reference year) FYE 2016 FYE 2017 FYE 2018 Coverage (%, FYE 2018)
Energy consumption

Electric power

Total amount (MWh)

20,469

19,495

21,937

20,885

21.7%

Consumption rate (MWh/m2)

0.0226

0.0205

0.0230

0.0215

Fuel

Total amount (MWh)

1,540

1,715

1,574

1,697

4.0%

Consumption rate (MWh/m2)

0.0018

0.0018

0.0017

0.0019

Region Air conditioning

Total amount (MWh)

2,854

3,208

3,077

3,256

100.0%

Consumption rate (MWh/m2)

0.0704

0.0792

0.0759

0.0803

Item Breakdown Unit FYE 2015 (Reference year) FYE 2016 FYE 2017 FYE 2018 Coverage (%, FYE 2018)
Greenhouse gas emissions (CO2)

Total

Total amount (t)

10,337

11,783

12,547

24,972

24.4%

Consumption rate (t/m2)

0.0114

0.0124

0.0132

0.0252

Direct emissions Scope1

Total amount (t)

233

292

289

298

37.7%

Consumption rate (t/m2)

0.0003

0.0003

0.0003

0.0003

Indirect emissions Scope2

Total amount (t)

10,104

11,491

12,258

11,815

24.4%

Scope3

Total amount (t)

12,678

64.9%

  • Data collection period
    The data collection period is from April to March, and the results are updated annually in principle.
  • Calculation method
    1. The consumption rate is calculated as total usage or emissions/total floor area (m2).
    2. Coverage is calculated as follows:
      Coverage (%) = ① Data collection range (m2)/② Maximum possible data collection range (m2)
      ① Data collection range is the floor area of the data collected.
      ② The maximum possible data collection range is the total floor area of the applicable properties.