(1) Scenario Selection

We established the two scenarios below with reference to the International Energy Agency (IEA) and Intergovernmental Panel on Climate Change (IPCC) when examining scenario analysis.

• 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.

(2) Identification of ITOCHU's Businesses Conducting Scenario Analysis

We have worked to identify the following businesses from all the businesses promoted by ITOCHU. The potential impact on these businesses is large from either transition or physical risks concerning climate change. Moreover, these businesses have a high level of importance in terms of financial affairs.

Identification of Businesses with a Large Transition Risk Impact

Identification of Businesses with a Large Physical Risk Impact

When identifying businesses with a large transition risk impact, we organized them according to the level of potential impact on transition risks and importance in terms of financial affairs. We analyzed the coal business and power generation business in the previous fiscal year. Following on from that, we selected the oil and gas upstream development business and conducted scenario analysis on it in this fiscal year.

In addition, when identifying businesses with a large physical risk impact, we organized them according to the level of potential impact on physical risks and importance in terms of financial affairs. We selected the Dole business and pulp business as new businesses subject to scenario analysis in this fiscal year.

The aforementioned five businesses are found in four non-financial sectors (energy, transportation, materials and buildings, and agriculture, food and forest products) that will potentially be greatly impacted by climate change as designated by the TCFD.

(3) Analysis of the Scenarios (Business Environment Analysis, Policies and Efforts in Each Scenario)

When analyzing scenarios, we identify risks and opportunities in terms of procurement, business operation and demand for each business not only for the short term but also the medium and long term from 2030. We organize and assess the factors with a high level of importance. We identify the high-impact variables in terms of transition and physical aspects for the factors with a high level of importance. Next, we use a financial model reflecting the conditions to analyze the scenarios. We measure the potential impact of climate change in regards to the analysis relating to the level of impact in terms of financial affairs. At the same time, we analyze the level of impact in terms of financial affairs including the effects from measures against risks and for opportunities.

Coal business

Business environment under the 4℃ scenario	Business environment under the 2℃ scenario
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.

Power generation business

Business environment under the 4℃ scenario	Business environment under the 2℃ scenario
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.

Oil and gas upstream development business

Business environment under the 4℃ scenario	Business environment under the 2℃ scenario
Demand for crude oil is expected to shrink across the world under the 2℃ scenario. Nevertheless, we will be able to increase revenue by capturing the opportunities of the global increase in demand for LNG and the increase in demand for new energies (e.g., biofuels).

Dole business

Business environment under the 4℃ scenario	Business environment under the 2℃ scenario
We expect climate change (the impact on the amount of harvest per unit area due to the increase in the average temperature) to have the impact of reducing revenue under both the 4℃ and 2℃ scenarios. Nevertheless, we will be able to increase revenue by dispersing risks with diversification of production areas (e.g., Sierra Leone) and by striving to improve our cultivation technologies and cultivation efficiency.

Pulp business

Business environment under the 4℃ scenario	Business environment under the 2℃ scenario
We will increase revenue due to an increase in pulp production output in some afforestation areas where production output is expected to expand under the 4℃ scenario. Nevertheless, our analysis shows that our revenue will decrease due to the impact of the reduction in production output in afforestation areas overall with the rise in the average global temperature. We will maintain production output at a certain level in afforestation areas with the suppression in the rise of the average temperature under the 2℃ scenario. If the carbon prices are introduced in pulp manufacturing factories using biomass energy, we will be able to curtail costs. In addition, we will be able to increase profit by increasing revenue with an increase in our pulp production output in afforestation areas where production output is expected to expand.

Apparel business

Currently, we assume the following will be the risks with a high level of importance: a reduction in the production output of raw materials (e.g., cotton) and an increase in costs due to a rise in emission prices. On the other hand, we assume that we can have expectations for the provision of products responding to climate change (e.g., low-carbon products) in terms of opportunities.

ICT business

Currently, we assume the following will be the risks with a high level of importance: an increase in costs due to rising emission prices, an increase in power prices because of the introduction of a high carbon tax, an increase in information system facility damage from natural disasters (e.g., typhoons and floods) and a strengthening of CO₂ emission regulations in countries and regions accompanying climate change. On the other hand, we assume that we can have expectations for an expansion in the development and spread of energy-saving and highly efficient IT and data analysis technologies and an expansion in investment and lending that will contribute to a suppression of CO₂ emissions in terms of opportunities.

Future efforts

In the future, we will conduct analysis from both transition and physical aspects to confirm the impact of climate change on all the businesses of our company. We will then further identify and organize fields where there will be a significant impact. We plan to examine specific measure policies in the future based on the degree of relative priority for businesses for which a response is required from over the whole of ITOCHU – including our eighth company newly established with our existing seven companies.

Renewable Energy Related Business

ITOCHU is working to solve social challenges. We are achieving this through business investment in power generation assets utilizing the geothermal, wind power and other renewable energies, and storage batteries business that are expected to grow as a necessary supporter of energy supply in the future. Click here for details on those businesses.

Carbon Dioxide Capture and Storage (CCS)

We recognize that CCS is an essential technology to aim for low carbonization. Therefore, we have participated in investment in Japan CCS Co., Ltd., which is conducting demonstration experiments in Tomakomai, to pursue the possibilities of practical application of CCS. (The cumulative volume of CO₂ injected as of the end of June 2019 is approximately 262,000 tons).

Toward Sustainable Plantation Operation in Response to Climate Change

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. 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 2019. For example, we spent approximately 2.5 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.

Scope of Aggregation

○:in scope of aggregation

1. The other business facilities cover business facilities owned or leased by ITOCHU (except facilities for residences).
2. The group companies in Japan and overseas cover consolidated subsidiaries directly invested in by ITOCHU (as of March 31, 2017) for FYE 2016 to FYE 2017. All consolidated subsidiaries are covered since FYE 2018 (coverage 100%).

Energy Consumption

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)

GHG Emissions Attributable to Business Facilities

(Unit:t-CO₂e)

(Unit:t-CO₂e)

(Unit:t-CO₂e)

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★

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.