Climate Change (Information Disclosure Based on TCFD Recommendations)
In May 2019, ITOCHU Corporation announced our support for the TCFD* recommendations in recognition of the importance of climate-related financial disclosures. Since then, we continue working to provide information disclosure based on TCFD recommendations.
- TCFD: The Task Force on Climate-related Financial Disclosures established by the Financial Stability Board (FSB).
Policy and Basic Concept Concerning Climate Change
Recognizing climate change as one of the global environmental issues requiring the highest level of urgency, we have worked towards achieving the nationally determined contributions (NDCs) set by the Japanese government in response to the enactment of the Paris Agreement. As a Group engaged in business activities on a global scale, ITOCHU also positions climate change and other global environmental issues as one of our highest priority management issues. We support national climate change-related laws and regulations (such as the Act on Rationalizing Energy Use and the Act on Promotion of Global Warming Countermeasures) and various governmental policies, and we will incorporate these into our policies and specific initiatives as opportunities for further growth.
We define our initiatives related to climate change in the ITOCHU Group Environmental Activities Policies “2. Response to Climate Change: We shall reduce greenhouse gas emissions and increase the efficiency of energy use within our own operations, as well as externally provide products and services that contribute to the mitigation and adaptation to climate change.” In March 2021, our Board of Directors approved the inclusion of greenhouse gas (GHG) emissions reduction targets for 2030, 2040, and by 2050 as core targets for our Medium-term Management Plan, Brand-new Deal 2023. These targets are in line with Japan NDCs, and will help us contribute to those goals. ITOCHU is committed to fulfilling our social responsibilities.
Under our corporate philosophy of the “Sampo-yoshi” approach, we will respond to climate change risks and opportunities in collaboration with the stakeholders to increase our corporate value.
Governance
ITOCHU views responding to climate change and other sustainability issues as an important management issue. Our Board of Directors gives due consideration to response policies for climate change-related risks and opportunities and GHG reduction targets and initiatives, and incorporates these policies into deliberations and decisions on annual budgets, business plans, and other core matters.
The ITOCHU Sustainability Committee is the body delegated with general management responsibilities concerning the proposal and implementation of the various policies that will enable us to respond to climate change and other sustainability matters. This Committee ascertains, manages, and evaluates climate change-related targets, the implementation status of transition plans, and current environmental and social risks and opportunities. ITOCHU’s Chief Administrative Officer (CAO) is the director responsible for climate-related issues and is also a member of the Headquarters Management Committee (HMC). The CAO also serves as chair of the Sustainability Committee. The CAO provides a report to the Board of Directors approximately twice per year on matters deliberated and decided by the Sustainability Committee in addition to a report on the status of major sustainability promotion activities. This creates an organization that allows the Board of Directors to appropriately supervise business and financial strategies (including reviewing strategy and making divestment and portfolio restructuring decisions) for responding to environmental and social risks and opportunities while giving proper consideration to matters deliberated and decided by the Sustainability Committee. As the executive level, management from each company and administrative division also serving as ESG Officers participate in Sustainability Committee meetings as core members. The Sustainability Committee receives reports on climate-related matters from the Sustainability Management Division and ESG Managers from each company and administrative division. We use these reports towards progress management and monitoring for each policy and various initiatives.
In 2021, our Board of Directors approved the inclusion of growth strategy and GHG emission reduction targets in our Medium-term Management Plan, Brand-new Deal 2023. This decision reflects our commitment to the climate-related issues impacting our Company and we believe this will enable us to lead the industry in realizing a decarbonized society in enhancing our contribution to and engagement with the SDGs through business activities. Based on this decision by the Board of Directors, the Sustainability Committee deliberates specific policies and targets related to decarbonized initiatives. Each business division works continuously to implement these policies and initiatives approved by the CAO, the director in charge, and progress is reviewed by the Sustainability Committee.
The chair of the Sustainability Committee and management from each company and administrative division (ESG Officers) meet with external experts (a Sustainability Advisory Board) once a year to engage in dialogue towards making continuous improvements to our climate change response. Through this dialogue, we promote climate change countermeasures based on an understanding of society’s expectations and demands on ITOCHU.
Governance System Concerning Climate Change (As of June 2023)
- CAO: Chief Administrative Officer
HMC: Headquarters Management Committee
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Climate-related Meetings Held by the Board of Directors and Committees | Frequency of Meetings and Reports | Main Items Deliberated or Reported on (FYE 2019 to FYE 2023) |
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The Board of Directors |
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Sustainability Committee |
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Strategy
ITOCHU applies the Policy and Basic Concept Concerning Climate Change to analyze scenarios based on TCFD recommendations (analysis of transition and physical risks and opportunities associated with climate change). We use the results of these analyses to realign our business strategy and portfolio.
Climate Change-related Risks and Opportunities
ITOCHU is engaged in various businesses in locations around the world. Each business is impacted by various short-, medium-, and long-term climate change transition risks and physical risks. As such, ITOCHU globally identifies, evaluates, and manages risks and opportunities with the possibility to have a material financial impact on our business, supply chain, and strategy. We conduct such analysis and evaluation throughout each business proposal management process and in our environmental and social risk management processes, which includes climate change.
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Climate-Related Risks and Opportunities | Impact of Climate-related Risks and Opportunities on the Organization’s Business, Strategy, and Financial Planning | Impact Timeline* | Impacted Value Chains | Related Businesses | |
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Transition Risks and Opportunities | Policy and Legal Systems |
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Medium-term Long-term |
Upstream, ITOCHU Group | Power generation business, operations, Fossil fuel business, Iron ore business, Automobile business, Chemicals business |
Technical Innovation | Business opportunities that contribute to combatting and adapting to climate change are expected to increase (e.g., renewable energy, energy storage systems, low-carbon fuels, low-carbon emission steelmaking raw materials, etc.) | Short-term Medium-term Long-term |
ITOCHU Group | Renewable energy, energy storage system businesses, Low-carbon fuel business, New material business, Iron ore business | |
Changes in Market Conditions | Demand for certain products and services may decrease due to market risks related to public policy, laws and regulations, or technological advancements (e.g. clean technology) | Short-term Medium-term Long-term |
Upstream, ITOCHU Group | Fossil fuel business, Chemicals business, Automobile business, Renewable energy, energy storage systems businesses, New material business, CCUS/emissions credit-related businesses | |
Physical Risks and Opportunities | Acute Physical Risks and Opportunities | Operations may be impacted or damaged by increased occurrences of abnormal weather patterns (e.g. droughts, floods, typhoons, hurricanes, etc.) | Short-term Medium-term Long-term |
Upstream, ITOCHU Group, downstream | Food business, Forestry-related businesses, Mining business |
We may be able to strengthen customer retention and/or attraction by strengthening our supply chain resilience to extreme weather patterns and promoting stable supply as a value proposition | Short-term Medium-term Long-term |
Upstream, ITOCHU Group, downstream | Food business, Forestry-related businesses | ||
Chronic Physical Risks and Opportunities | Our capability to maintain and increase the quantity of agricultural and forestry-related harvests, as well as products manufactured using these yields, may be impacted by climate-related changes such as increasing temperatures and likelihood of droughts. | Medium-term Long-term |
Upstream, ITOCHU Group, downstream | Food business, Forestry-related businesses |
- Short-term: less than 1 year, medium-term, up to 3 years, long-term: 4 or more years
Scenario Analysis
Scenario Selection
We consider which businesses to include in our scenario analysis by evaluating the business sectors that are highly susceptible to the impact of operating environment changes caused by climate change mitigation. From this evaluation, we identified the power generation business, energy business, iron ore, automobile, and chemicals businesses and coal business as businesses that would be significantly impacted by political, regulatory, and other transition risks. We then selected the Dole business feed and grain trade and the pulp businesses for inclusion in our scenario analysis as business highly susceptible to physical risks related to climate change.
When identifying business sectors that are highly susceptible to the impact of operating environment changes caused by climate change mitigation, we referenced the four non-financial sectors (energy, transportation, materials & buildings, and agriculture, food, & wood products) specified by the TCFD as being highly susceptible to the latent impact of climate change. The abovementioned five businesses are included in these sectors.
- Business for Scenario Analyses
![[Fig]](/en/csr/img/cs_env_cc_23_img01.png)
Definition of Scenario Groups
When considering our scenario analysis, we referenced materials published by the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC). These materials are highly recognized internationally for the credibility, are referenced in TCFD recommendations, and cover a broad range of business domains. As a result, we set the following three scenarios.
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Scenario | 4℃ | <2℃ | 1.5℃ | |
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Image of society | The policies of countries, such as the Intended Nationally Determined Contributions (INDC) established in accordance with the Paris Agreement, are implemented. Nevertheless, the average temperature at the end of this century rises by 4℃. This is a society in which there is a high likelihood climate change (e.g., a rise in temperature) will impact business. |
The average temperature rise is kept below 2℃ until the end of this century. Bold policies and technological innovation are promoted. This is a society in which social changes due to the transition to a de-carbonized society are highly likely to impact business. |
Bold policies and technological innovations will be promoted to limit the average temperature increase to 1.5℃ until the end of the century and achieve sustainable development. This is a society in which social changes due to the transition to a de-carbonized society are highly likely to impact business. |
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Reference scenarios | Transition aspects |
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Physical aspects |
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Risks and opportunities | Risks and opportunities in terms of physical aspects will be more likely to surface |
Risks and opportunities in terms of transition aspects will be more likely to surface |
Risks and opportunities in terms of transition aspects will be more likely to surface |
- The IEA WEO 2019 Sustainable Development Scenario is the following scenario: The world works to keep the rise in temperature to less than 2℃ – if possible, 1.5℃. At the same time, this is a scenario in which the targets of everyone being able to use energy and improving air pollution are achieved.
- IEA WEO 2021 "Net Zero Emissions by 2050 Scenario" is a scenario that shows a possible path for the global energy sector to achieve net zero GHG emissions by 2050 and limit temperature rise to 1.5℃ above pre-industrial levels.
- Important input parameters and prerequisites for the climate-related scenarios we used include the following types of parameters.
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Parameters Related to the Power Generation Business in the US 2040 4℃ Scenario <2℃ Scenario Carbon price/emissions trading - N/A
- $140/ton
Fossil fuel price - Coal: $108/ton
- Gas: $7.5/MMBTU
- Coal: $77/ton
- Gas: $5.9/MMBTU
Renewable energy prices - Solar utility scale: 7.2 to 8.8 yen/kWh
- Land-based wind power: 6.2 to 7.7 yen/kWh
- Solar utility scale: 6.6 to 7.1 yen/kWh
- Land-based wind power: 6.2 to 7.7 yen/kWh
Energy production volume by source - Coal thermal: 1,016 TWh
- Gas thermal: 1,480 TWh
- Renewable energy: 1,488 TWh
- Coal thermal: 153 TWh
- Gas thermal: 959 TWh
- Renewable energy: 2,560 TWh
CCS dissemination rate - N/A
- Coal thermal w/CCS: 64%
- Gas thermal w/CCS: 18%
Scenario Analysis and Results
For the scenario analysis, we did not limit the timeline range to the short-term. We also added medium- and long-term axes for 2030 and beyond when organizing and evaluating the factors of latent risks and opportunities that could have a significant qualitative or quantitative financial impact for each business. We extracted risk and opportunity factors from the perspective of procurement, business management, and demand, and then organized and evaluated factors of high importance. For particularly important factors, our scenario analysis was based on finance models that reflect defined parameters. We defined these parameters by identifying variables that significantly impact transition and physical risks and opportunities. For the analysis of financial impact level, we measured the latent impact level of climate change and analyzed the financial impact level, including the effect of risk and opportunity measures.
The quantitative information used in our scenario analysis reflects judgments made by ITOCHU based on scenarios prepared by sources such as the IEA. While we worked to increase analysis precision, the analysis does include numerous uncertainties.
1. Businesses for Which Transition Risks Are the Main Issues
The main issues for fossil fuel-related businesses are transition risks in the <2℃ scenario. The main issues for Chemicals Business, Iron Ore Business and Automobile Business the 1.5℃ scenario.
Timeframe | By 2040 | |
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Temperature Band Scenario | <2℃ Scenario | |
Main risks and opportunities | Transition |
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Physical |
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Business environment under the scenario Business impact assessment |
Transition risks will greatly squeeze income with carbon taxes and carbon capture, usage and storage (CCUS) costs. Therefore, the income of thermal power generation may decrease. However, cumulative income is expected to improve due to an increase in renewable energy sales and a decrease in carbon taxes and CCS costs by switching to measures emphasizing renewable energy. Analysis according to the EBITDA indicator (%)* ![]() |
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Financial information |
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Timeframe | By 2040 | |
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Temperature Band Scenario | <2℃ Scenario | |
Main risks and opportunities | Transition |
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Physical |
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Business environment under the scenario Business impact assessment |
In the 2℃ scenario, a global decrease in demand for fossil fuels is projected but it is possible to maintain earnings by capturing new energy demand for fossil fuel alternatives and environmental business opportunities such as CCUS. Assumes a low possibility that natural disasters (abnormal weather) in relevant regions would further increase in scale. (Evaluated multiple scenarios for energy price fluctuations through 2040) Analysis according to the profit after tax (%) ![]() |
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Financial information |
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Timeframe | By 2030 | |
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Temperature Band Scenario | 1.5℃ Scenario | |
Main risks and opportunities | Transition |
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Physical |
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Business environment under the scenario Business impact assessment |
Under the transition scenario, while the introduction and increase in carbon tax will increase costs and lower demand for virgin plastics will result in lower sales and profits, our chemical business will be able to increase earnings by capturing opportunities in environmental businesses such as recycled plastics, bioplastics, clean ammonia and methanol, where demand is expected to increase. Analysis according to the profit after tax (%) ![]() |
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Financial information |
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Timeframe | By 2050 | |
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Temperature Band Scenario | 1.5℃ Scenario | |
Main risks and opportunities | Transition |
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Physical |
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Business environment under the scenario Business impact assessment |
The introduction of a carbon tax is expected to increase the cost of fuel, materials, and other items. Nevertheless, the impact on earnings will be limited due to strengthened relationships with blue-chip business partners and improvement of operational efficiencies. Analysis according to the profit after tax (%) ![]() |
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Financial information |
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Timeframe | By 2030 | |
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Temperature Band Scenario | 1.5℃ Scenario | |
Main risks and opportunities | Transition |
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Physical |
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Business environment under the scenario Business impact assessment |
The automobile industry is expected to shift from internal combustion engine vehicles to electric vehicles. Our customers are found all over the world. That means we can expect automobile demand to remain firm despite the expectation there will be a gradual shift in the vehicles we handle from internal combustion engine vehicles to electric vehicles in line with the regulations of each country. Analysis according to the Gross trading profit indicator (%) ![]() |
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Financial information |
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- Earnings before interest, taxes, depreciation and amortization (This refers to earnings calculated by adding interest expenses and depreciation expenses to earnings before tax.)
Initiatives in Coal-related Business
The business environment and response measures under the 2℃ scenario for the coal-related business is as follows.
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Business environment under the scenario | Under the 2℃ scenario, business could be impacted by technological innovation, regulatory trends, and global energy demand but, overall, thermal coal usage volume will decrease over the medium- and long-term. |
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Measures and policies |
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Financial information |
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2. Businesses for Which Physical Risks Are the Main Issues
The main issues for agriculture- and forestry-related businesses are physical risks in the 4℃ scenario.
Timeframe | By 2030 | |
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Temperature Band Scenario | 4℃ Scenario | |
Main risks and opportunities | Transition |
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Physical |
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Business environment under the scenario Business impact assessment |
The decrease in crop harvests attributable to climate change can be supplemented by increasing per-unit crop harvest volume. This can be accomplished by selecting breeds that are viable in high-temperature climates and through improvements to production methods, including cultivation and irrigation methods. We also started pineapple production in West Africa (Sierra Leone, etc.) as part of production site diversification to prepare for weather risks. The above initiatives will make it possible to increase earnings. Analysis according to the EBITDA indicator (%)* ![]() |
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Financial information |
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Timeframe | By 2030 | |
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Temperature Band Scenario | 4℃ Scenario | |
Main risks and opportunities | Transition |
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Physical |
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Business environment under the scenario Business impact assessment |
The amount produced is expected to decrease in some areas due to the rise in the global average temperature. Nevertheless, we can continue to improve earnings by increasing the amount of pulp we produce with the augmentation of facilities in afforestation regions where the amount produced is expected to increase and by curtailing the rise in harvesting costs with measures against soil softening. Analysis according to the EBITDA indicator (%)* ![]() |
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Financial information |
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Timeframe | By 2030 | |
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Temperature Band Scenario | 4℃ Scenario | |
Main risks and opportunities | Transition |
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Physical |
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Business environment under the scenario Business impact assessment |
The decrease in the amount of crops harvested due to weather disasters and rising temperatures may lead to supply instability and increases in prices. However, we can maintain a supply structure by diversifying the countries from where we import crops and then provide further opportunities for low-carbon-related products. Analysis according to the Gross trading profit indicator (%) ![]() |
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Financial information |
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- Earnings before interest, taxes, depreciation and amortization (This refers to earnings calculated by adding interest expenses and depreciation expenses to earnings before tax.)
Impact on Existing Strategies and Business Transition Plans
During our scenario analysis, we ascertained high-impact negative financial risks associated with not implementing climate change measures such as shifting current business strategy or business regions. As a result, we have already begun incorporating specific business transition plans and financial plans (including divestment and portfolio restructuring) into our Medium-term Management Plan, Brand-new Deal 2023 based on the basic policy of leading the industry in realizing a decarbonized society in enhancing our contribution to and engagement with the SDGs through business activities.
Transition Plans for Main Businesses Subject to Transition Risks
- In the power generation business, increase project development towards the goal of increasing our rate of renewable energy (equity interest basis) to over 20% by FYE 2031.
- Selling our Drummond interests, in line with our policy of withdrawal from thermal coal interests.
(We will also aim to sell off other thermal coal interests by the end of FYE 2024.) - Build a next-generation fuel value chain based on hydrogen and ammonia.
- Create distributed power supply platform using AI storage batteries boasting the No. 1 sales in Japan.
(Aim for scope exceeding cumulative power storage of 5 GWh by FYE 2031.)
Transition Plans for Main Businesses Subject to Physical Risks
- Increase per-unit harvest volume by selecting breeds that are viable in high-temperature climates and improvements to production methods.
- Expand business into other regions projected to see growth in production volume.
The Division Company Management Committee (DMC) conducts annual reviews of business risks and opportunities, including those related to climate change. Each DMC determines the order of priority for each policy and business, including business transition plans, and then drafts annual plans. The annual financial plans for each company are presented for approval to the HMC, the executive body, and the Board of Directors, the supervisory body, before final approval by the Board of Directors. This final approval is subject to a comprehensive analysis and deliberations from an ESG perspective, including matters related to climate change.
In March 2021, ITOCHU also issued SDGs Bond (Sustainability bond totaling US $500 million) as part of our financial strategy to enhance our contribution to and engagement with the SDGs through business activities. A portion of these SDGs Bonds were allocated towards R&D-related investments in climate-related subjects like those indicated below. The issuance of SDGs Bonds will increase recognition of ITOCHU Group policies to a broader range of stakeholders and further promote initiatives related to the SDGs.
- GHG emissions reduction initiatives: Renewable energy (power generation, power storage)
- Initiatives to promote GHG emission reduction measures at FamilyMart.
We confirmed that implementing these types of transition plans will enable us to maintain resilient business operations, even in over the medium- and long-term, for Group businesses, products, and services. Beyond the scope of applicability to this scenario analysis, ITOCHU is engaged in diverse business activities in various regions. Those business activities are also impacted by climate change. However, at this point in time, we have determined that the impact on Group overall earnings caused by risks associated with each individual business activity would be limited.
To confirm the impact of climate change on overall Group business, we will continue to conduct analyses of both transition and physical risks. We will further identify and organize fields susceptible to significant impact and evaluate response policies based on an order of priority given to areas requiring a response.
Risk Management
As a Group engaged in global business operations, ITOCHU constantly monitors climate change policies in each country, the status of abnormal weather around the world, and the business risks associated with changes in average temperatures. In the analysis of risks for our entire Group, we manage climate change risks identified based on an analysis of information concerning climate change measures, including regulatory information and abnormal weather information, as one of the major risks (environmental and social risks) facing our company. Identified climate change risks are also examined and evaluated during our investment decision process. Each department in charge of risk management has established an organization for risk identification, evaluation, information management, and monitoring for the consolidated group.
Identification and Evaluation of Climate Change Risks
ITOCHU recognizes risk management as an important management issue. Referencing the COSO-ERM framework, we outline our basic policy on risk management for ITOCHU and prepare the organizations and methods necessary for risk management. Each company and the Sustainability Management Division cooperate regularly to gather information to assess risk importance. This information includes trends in climate change policy and regulations, which mainly consists of existing and new regulations related to climate change in the countries in which we operate, climate change-related technology, and clean-tech business. We also gather information on global abnormal weather and average temperature increases. Importance is identified and assessed using specific indicators and from the perspective of ascertaining the substantive financial or strategic impact that climate risk may have on the Company. For example, for non-consolidated businesses, we identify an important risk as a risk that would cause a 10% change compared to net sales from the previous year, a 20% change in average net income for the most recent past five years, or a 30% change in net assets from the end of the previous year. For consolidated businesses, we would use a change of 10% from previous fiscal year earnings or a 3% change in total capital from the end of the previous year.
ITOCHU organizes the information we gather on climate change risks and opportunities into the material climate change-related risks and opportunities (risk criteria), with analysis for both transition and physical risks. We use risk criteria to identify and assess climate change risks in the risk management process for each phase of business, including the start of a new business, existing businesses, handled products, supply chains, Group company business management, and business strategy reviews.
Climate change risks gathered during the risk assessment process are deliberated by the Sustainability Committee and other relevant committees to ensure we continuously review risk criteria and the risk identification process. During these deliberations, the relevant committees incorporate opinions received form the Sustainability Advisory Board, which promotes dialogue concerning sustainability between ITOCHU management and external stakeholders.
Integrating Climate Risk Management into the ITOCHU Group Risk Management System
Due to the nature of our broad-based operations, ITOCHU is subject to various risks, including market risks, credit risks, and investment risks. In addition to establishing various internal committees and designated responsible departments, we have created a risk management organizational structure and management methods necessary to address these risks. This organizational structure includes outlining management regulations, investment standards, risk limits, and transaction limits, as well as establishing structures for reporting and monitoring to enable integrated Group risk management.
Climate change risks are one (environmental and social risks) of the major risks subject to Group risk management. We incorporate this risk management into the assessment methods for each business phase shown in the table below (business, product, Group companies, supply chain, strategy, and portfolio).
Climate-related Risk Management Procedures and Evaluation Methods for Each Business Phase
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Business Phase | Evaluation Method |
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Business start | Environmental risk assessments for new investment project (approx. 80 per year) |
Business management |
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Review business strategy | Consider business strategy, portfolio restructuring |
If risks and opportunities are identified via the evaluation methods at each business phase, we use the tool shown below in Risk Assessment & Management Activities to assess the impact of risks and opportunities on business. Risk Assessment & Management Activities include quantitative evaluations such as scenario analyses and stress tests, and qualitative evaluations such as assessments of compliance with investment policy and GHG reduction targets. Quantitative information for risks and opportunities not related to climate change is added to climate change risk and opportunity information that has been quantitatively assessed. This information is then used to analyze the level of contributions to earnings.
Risk Assessment & Management Activities
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Managed Factor | Risk and Opportunity Factors (example) | Evaluation & Management Activities (example) |
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Refer to: Our risk management, including climate change, related to Company operations
Climate Change Risk Management Organization
Business Start Phase
ITOCHU has established a multilayered decision-making process that seeks to realize swift decision-making by delegating discretionary power to each internal company, while pursuing investment returns and controlling investment risks. Depending on the size and terms of a project, a review is conducted at the internal company level or by the Investment Consultative Committee and the HMC (Headquarters Management Committee). In all cases, ESG risk assessments, including climate change risk, are incorporated into considerations when making investment decisions in the business investment process, which includes climate change risks. Using a tool called ESG Checklist for investments, we conduct shadow pricing for the purposes of risk analysis of GHG emission-intensive projects, promotion of low-carbon investments, identification and expansion of low-carbon business opportunities, stress testing, etc, which is one of internal carbon pricing methodologies. As a member of the HMC and the Investment Consultative Committee, the CAO, who chairs the Sustainability Committee, participates in the screening of projects that exceed the authority of the division company president. This system reflects the content of deliberations at the specific stage of climate change risk and at the assessment stage of climate change risk for company-wide risk management.
Refer to: Our business investment management
Business Management Phase
ITOCHU evaluates and manages risks such as climate change, natural disasters, and ESG investment identified in the business start stage and the business management stage through collaboration between responsible committees such as the Sustainability Committee and Internal Control Committee and the departments in charge. Environmental and social risks, including climate change, are summarized as one of the major risks subject to centralized management. Each year, the Sustainability Management Division serves as the executive unit in charge of organizing this information and issuing reports to the Internal Control Committee along with information on the other major risks to integrate the risk information into company-wide risk management system. The Sustainability Committee also deliberates on policies and measures related to climate change risk and how to promote the risk management system, etc. The director serving as chair of the Sustainability Committee reports on the content of deliberations to the Board of Directors approximately twice per year.
As part of our specific climate-related risk management procedures, we compile the results of Scope1/2 and Scope3 for each of 8 Division Companies every year. The results are compiled in a form that allows for an assessment over time, and are reported to the Sustainability Committee and the Board of Directors after being approved by each Division Company. This process enables the Board of Directors to oversee progress toward achieving GHG emissions reduction targets from a medium- to long-term perspective, and is also used to review new business strategies.
Review Business Strategy
Reviews of business strategy related to climate change are conducted by the Division Company Management Committee (DMC), and then by the HMC via the Investment Consultative Committee on which the CAO, who serves as the chair of the Sustainability Committee, also participates as a key member. Final decisions are made following deliberation by the Board of Directors. Scenario analysis based on TCFD recommendations is also used as a tool when considering business strategies and portfolio restructuring. In our analysis, we analyze short-term, medium-term, and long-term climate-related risks and opportunities once a year for their impact on organization business, strategy, and financial planning.
Metrics and Targets and Action Plan
ITOCHU has set the following targets for GHG emissions, electricity usage, and clean-tech business as part of our response to climate change risks and opportunities. When setting these metrics and targets, we reference Japan NDC and IEA materials, which are highly recognized internationally and can cover a wide range of business areas.
GHG Emissions Reduction Targets
- Metrics (aggregation range): Scope 1/2/3 (consolidated subsidiaries), fossil fuel business and interests (consolidated subsidiaries, equity, general investments)
- Targets:
- Achieve net zero GHG emissions by 2050.
- Achieve 75% reduction from 2018 levels by 2040, aim for “offset zero”* through aggressive promotion of businesses that contribute to GHG emission reductions.
- Offset zero: When reduction contributions exceed company GHG emissions
- Achieve 40% reduction from 2018 levels by 2030.
![[Figure]](/en/csr/img/cs_env_cc_23_img07.png?230629)
Refer to: Trends in our GHG emissions
Scope1/2 Short-term Reduction Targets
ITOCHU has set a target of 30% reduction in power consumption at Japanese Bases of ITOCHU Corporation by FYE 2023 compared to the FYE 2011, and has been working to save electricity by upgrading facilities, such as by switching to LED lights. As a result, we achieved a 51.8% reduction in FYE 2023 compared to FYE 2011, far exceeding the initial target. In light of the fact that considerable progress has already been made in reducing Scope1/2 emissions, including electricity consumption, we have set a new short-term target of reducing Scope1/2 emissions at our Japanese Bases. We have registered such target with the GX League, a group of companies challenging the green transformation led by Japan’s Ministry of Economy, Trade and Industry in collaboration with the Japanese government and academia. We also participate in the Carbon Credit Market of Tokyo Stock Exchange, which will be used in the GX League, and contribute to the decarbonization of our own and other companies.
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(Unit: t-CO2e)
FYE 2022 (Base Year) |
FYE 2024-2026 Total (Target) |
FYE 2026 (Target) |
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Scope1 | 77 |
223 |
74 |
Scope2 | 5,946 |
17,308 |
5,711 |
Scope1+2 Total | 6,022 |
17,531 |
5,785 |
- The scope of calculation is based on the “the Rules for Phase 1 in the GX-ETS” and does not match Scope1/2 for Japanese Bases of ITOCHU Corporation as a whole.
Clean-tech Business Metrics and Targets (Action Plans)
We set the following metrics and targets (Action Plans) in ITOCHU Clean-tech Business as one of the main metrics (benchmarks) for climate-related risks and opportunities.
Refer to: Our clean-tech business
Action Plan
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Reflecting Climate Change Issues in Corporate Officer Remuneration System
To enhance the link between management strategy and executive compensation structure, ITOCHU decided to newly incorporate climate change and ESG/SDGs response into the evaluation of each executive from FYE 2021. Director remuneration is determined according to factors that include degree of contribution to ITOCHU Corporation, including addressing climate change, ESG and SDGs, based on a standard amount for each position.
Refer to: Corporate Officer Remuneration System
Initiatives
Initiatives in Business Tackling Climate Change
Toward Sustainable Plantation Operation in Response to Climate Change
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ITOCHU group company Dole has a banana field on Mindanao Island in the Philippines, where typhoons, droughts, pests and diseases have occurred. Banana production volume decreased by 40% to 440,000 tons in FYE 2017. In light of this situation, we conducted the following analysis.
- Climate change risk assessment (short- and medium-term risks) in the Group company environmental status survey (conducted on 2 to 3 companies per year) as a part of global risk management process.
- As information necessary for risk assessment, we ascertained domestic and international trends related to climate change and problem cases caused by climate change. We used ERM to analyze those trends.
As a result, we recognized that the concentration of production areas was a serious risk. To recover and expand production while dealing with this risk, we introduced irrigation equipment for bananas, consolidated and expanded agricultural land, and implemented measures against pests and diseases. Since similar risks exist in pineapple cultivation, we also decided to improve productivity by investing in equipment for pineapple farms and reviewing cultivation methods. We also promoted diversification of production areas in preparation for abnormal weather risks. Through the above analysis and countermeasures, we were able to maintain banana and pineapple production by making full use of diversified production areas and cultivation techniques, even when several typhoons occurred near Mindanao Island in 2020.
Withdrawal from Interests in Thermal Coal
ITOCHU has invested in several coal interests, but in the future these businesses will likely be subject to carbon tax. Also, countries will introduce energy diversification policies, which will lead to the promotion of renewable energy and energy saving technology. The changing and more competitive prices of renewable energy risks decreased profits from coal-related businesses, causing these assets to become impaired or fixed.
Based on this risk analysis, in 2019 ITOCHU announced that we will not develop a new coal-fired power plants or acquire thermal coal mine businesses. In February 2019, we sold all interests in the Rolleston thermal mine owned by ITOCHU Minerals & Energy of Australia Pty Ltd (IMEA). In 2021, we declared through our Medium-term Management Plan that we will lead the industry in realizing a decarbonized society. As part of this initiative, we sold off interests in Drummond and Ravensworth North.
We will continue to review existing thermal coal mine businesses as we seek to contribute to the development of a sustainable society while also continuing to meet societal demands for stable energy supply to domestic and overseas consumers.
Full Switchover to Real CO2-free Electricity at Tokyo Head Office
ITOCHU is sourcing its real CO2-free electricity, together with a Non-Fossil Fuel Energy Certificate showing the environmental value of not emitting CO2, from TEPCO Energy Partner, Incorporated, which supplies electricity to the Tokyo Head Office since January 2020. The Non-Fossil Fuel Energy Certificate includes the tracking information (information about type of energy sources and power plant location) of Maebashi Biomass Power Plant (Maebashi, Gunma Prefecture), which is operated by a subsidiary of Kandenko Co., Ltd., and is used at the Tokyo Head Office building in combination with purchased electricity. This initiative can also be used to prove compliance with “RE100,” a global initiative of businesses committed to 100% renewable electricity, in response to the global trend towards decarbonization.
Refer to: Press release regarding full switchover to real CO2-free electricity at Tokyo Head Office
Initiatives for the Tokyo Metropolitan Government Program to Prevent Global Warming
ITOCHU submitted a plan to the Tokyo Metropolitan Government to reduce the CO2 emissions in our Tokyo Headquarters by 25% from the reference value (average value from FYE 2003 to FYE 2005) over five years from FYE 2021 to FYE 2025 based on the Ordinance on Environmental Preservation. Our energy consumption CO2 emission in FYE 2022 was 5,717t-CO2. This is an approximately 46% reduction compared to the reference value.
The document we have submitted to the Tokyo Metropolitan Government is as follows.
- In addition to the Tokyo Headquarters, the adjacent commercial facility of Itochu Garden is also subject to the Greenhouse Gas Emission Reduction Plans submitted to the Tokyo Metropolitan Government.
Collaboration with Outside Initiatives
Activities Through Business 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 as a committee member in the Global Environment Committee of the Japan Foreign Trade Council (JFTC), a nation-wide association of Japanese trading firms. We are striving to build a low-carbon society, construct a recycling-orientated society, and to support environmental related laws and regulations. We continue to support the JFTC's Long-term Vision for Climate Change Measures for mitigating climate change, which is consistent with our policies and goals.
When the industry and trade associations in which we participate decide on the directions of climate change, etc., we will express our opinions in line with the ITOCHU Group Sustainability Policy in the decision-making processes. In the event that the policies of such organizations become significantly weaker than or contradict from our policies, we will strive to align them with our policies.
2030 Reduction Targets for Domestic Business Activities (Trading Industry)
- In FYE 2031, we will strive to reduce unit power consumption (Electric power consumption per floor area for the entire company) by 15.7% from FYE 2014 level. (Reestablished July 2018)
(We have set a target of reducing power consumption at our Japanese Bases by 30% from FYE 2011 level, and have achieved 51.8% reduction in FYE 2023.)
Long-term Vision for Climate Change Measures of the Japan Foreign Trade Council
To create a carbon-neutral society, the JFTC aims to effectively utilize its links with other industries and organizations, cooperate in implementing their long-term visions, and contribute to achieving the long-term goals for 2050 set out in the Paris Agreement. Based on this vision, JFTC member companies will position the investigation and implementation of measures to mitigate and adapt to climate change as key business issues and strive to generate new businesses and solutions. We have flexibly evolved our businesses according to changing times and diverse needs. Shosha (trading firms), which operate worldwide and conduct business in cooperation with various players in a wide range of industries, are able to fully exercise their capabilities in contributing to solutions for the global challenge of climate change.
Participation in TCFD Consortium
Refer to: Participation in Initiatives
Participation in CDP (Climate Change)
Refer to: Participation in Initiatives
Participation in COOL CHOICE
Refer to: Participation in Initiatives
Participation in the GX League
Refer to: Participation in Initiatives
Participation in Japan Climate Initiative (JCI)
Refer to: Participation in Initiatives