The global environment is the foundation for all human beings, living creatures and ecosystems on this earth. The activities of corporations could not continue without a sound global environment.
Recognizing that climate change is a grave challenge faced by the world, the EBARA Group added its signature in endorsement of the TCFD in 2019. Through dialogue with our stakeholders, we will continue to improve our engagement with climate change and disclosure.
Summary of Disclosure Based on TCFD Recommendations 2023
Added scenario analysis for the building and industrial equipment, water infrastructure, and solid waste treatment markets.
Summary of Disclosure Based on TCFD Recommendations 2022
Added in-depth scenario analysis for our businesses in the Oil and Gas Market as well as the Semiconductor Manufacturing Market
Summary of Disclosure Based on TCFD Recommendations 2021
A comprehensive scenario analysis was conducted for all business segments.
Deliberations regarding sustainability, including environmental, social, and governance factors, are incorporated into the annual agenda of the Board of Directors, and discussions are conducted from various perspectives on a regular basis. In particular, the board regards initiatives for climate-related risks and opportunities as an important theme.
The Board of Directors holds discussions on the activities conducted by the Executive Officers. After thorough review of those actions, feedback is provided to the Sustainability Committee.
Directors also attend the Sustainability Committee, which is an executive committee body, to monitor and supervise the status of sustainability initiatives.
Directors' interest in climate-related risks and opportunities is high, and they provide objective advice from their outside perspectives to the Sustainability Committee.
Chaired by the President, Representative Executive Officer, CEO & COO. All executive officers participate as members, and outside experts on sustainability are invited as advisors.
Responding to climate change is a material issue identified in the Group’s long-term vision E-Vision 2030 and all members of management consider it a priority management issue.
The Sustainability Committee is responsible for setting policies for overall sustainability management activities, including climate-related initiatives, as well as developing action plans and reviewing progress. The committee strives to incorporate advice offered by the attending directors into its activities.
The discussions of the Sustainability Committee are reported to and reviewed by the Board of Directors
The Risk Management Panel identifies key risks that the company faces in the short~medium term, based on the results of risk assessments conducted periodically by the risk management division. From the list of possible risk items identified in this risk assessment, the risk response system is reevaluated through questionnaires and interviews with high-level management, and the lead department is clarified and reflected in operations.
Environmental risks are included in the purview of risks handled by the Risk Management Panel, and the Risk Management Panel determines the policy for responding to acute physical risks such as climate-related disasters, etc.
When climate-related risks and opportunities are related to the fiscal condition of the company (i.e., asset disposal, investments and loans, etc.) they are subject to discussion at the Management Meeting.
The Management Issue Action Plan Monitoring Committee manages the progress toward achieving the E-Plan, our Medium-Term Management Plan, and looks at both financial and nonfinancial action items in-depth, including issues relating to climate change.
Governance Information (2023)
The Board of Directors deliberated nonfinancial targets (including climate-related risks and opportunities) to include in E-Plan 2025, a medium-term management plan covering the three-year period from 2023 to 2025, as well as the integration of nonfinancial KPI in to the executive officer management issue action plan, which is created based on the basic policies laid out in the E-Plan.
After setting nonfinancial KPI and targets, the Sustainability Committee and the Board of Directors regularly report on the status of achievement. The board will continue to confirm the status of achievements, issues, and future action plans, and support the improvement and strengthening of measures as necessary.
In FY2022, we introduced a system to link ESG performance indicators with executive compensation as a mechanism to support the achievement of nonfinancial targets.
In December 2022, we held a ESG briefing for institutional investors. The Chairman of the Board of Directors explained the discussions regarding ESG issues conducted by the Board of Directors. As one of the themes of this discussion, the President, Representative Executive Officer, CEO and COO, who is a member of the Board of Directors, explained the climate-related scenario analysis for the oil and gas as well as semiconductor manufacturing market, which was released in July 2022.
Since 2021, the Board of Directors has checked and advised on TCFD recommendations prior to disclosure. This disclosure in 2023 has also been made public following the confirmation process by the Board of Directors.
The Sustainability Committee convened four times in 2022. Each meeting included deliberation on climate-related issues and progress of measures toward carbon neutrality and environmental management.
Beginning in the second half of 2022, climate change-related scenario analyses were conducted for each market that had not yet been conducted (Building & industrial equipment, water infrastructure, and solid waste treatment). The results were reported to the Sustainability Committee.
All climate-related information disclosed in 2023 was reviewed by the Board of Directors and the Sustainability Committee.
The determination of nonfinancial climate-related risks and opportunities was conducted in 2022 over multiple meetings to organize our approach as a group.
The determination was used to establish action plans for nonfinancial targets (Nonfinancial Management Issue Action Plans) for the period of E-Plan 2025, the medium-term management plan, that began in 2023. The Sustainability Committee monitors the status of all nonfinancial KPI, including climate-related risks and opportunities.
We are considering having the Sustainability Committee take the lead in setting policies, annual budgets, business plans, performance targets, and monitoring progress regarding risks identified in the climate change scenario analyses.
In 2022, the Risk Management Panel (RMP) held four regular meetings and identified risks significant to the Group’s activities. The RMP then determined the departments responsible for the identified risks and confirmed countermeasures are in place.
With regard to climate change, the Group identified the shift to sustainability as a significant risk and confirmed the direction and progress of its efforts toward carbon neutrality.
In addition, natural disasters such as earthquakes, typhoons, and flooding were identified as critical risks for the Group. Training and discussions regarding measures for the future were conducted in various divisions as a part of Business Continuity Management (BCM) measures, so that the Group may continue business operations in the event of a disaster
The Carbon Neutral Project, which was launched in January 2022 in order to achieve the goal of Groupwide Carbon Neutrality by 2050, announced the Group’s GHG Emission Reduction Goals in December 2022.
The project became a permanent section under the jurisdiction of the Chief Risk Officer in 2023.
The Carbon Neutral Promotion Section implements measures in accordance with the roadmap established by the Carbon Neutral Project. The Section discusses and reports on the policies and progress of carbon neutrality activities to the Sustainability Committee.
We follow the following processes in our consideration of the impact of climate change upon the EBARA Group’s businesses.
2023 Updates: Disclosed strategies for each target market and updated some information previously disclosed in 2022
Identification and Assessment of Risks and Opportunities 2023 Update
Scenario Analysis 2023 Update
Evaluation of Financial Impact 2023 Update
Establishment of Measures 2023 Update
In 2021, we began analyzing climate-related scenarios for each target market.
In 2022, we disclosed the results of our scenario analyses for the oil and gas market and the semiconductor manufacturing market.
In 2023, we conducted further scenario analyses for the remaining target markets (building and industrial, water infrastructure, and solid waste treatment), the results of which you will find below.
For the risk assessment, we first sorted risks into “physical” and “transition” types of risk. We then categorized similar risks into a medium category, after which we identified possible risk events that could happen in each business segment’s target market. We then assessed the possible magnitude of financial impact of those events from large to small.
In the opportunity assessment, we looked at each risk event identified in the risk assessment and evaluated if there may be aspects of opportunity. We then assessed the potential financial impact from acting on the opportunity from large to small.
We have identified climate-related risks and opportunities through 2050 for each of the EBARA Group’s major target markets, in line with the TCFD recommendations.
We referred to guidelines and other globally trusted resources such as SASB, IEA, and the Japanese Electrical and Electronics Industries’ Long-term Strategy on Climate Change to identify risk events that could impact our business and evaluate the significance of potential risks and opportunities.
Type of Risk |
Medium category |
Risk Event | Assess -ment |
Major risks and opportunities | Risk | Opportu -nity |
Transition | Policy/ Regulation |
Carbon pricing, national carbon emission targets and policies | Large | - Carbon pricing of GHG emissions - Implementation of strict regulations regarding GHG emissions from manufacturing sites |
● | |
Industry/ Market |
Changes in customer companies, governments, and markets | Large | - Demand trends for oil, gas, and ammonia affecting sales and operating profit | ● | ● | |
Physical | Acute | Extreme weather conditions | Large | - Production stoppages caused by damage to production sites due to heavy rains and typhoons | ● |
Type of Risk |
Medium category |
Risk Event | Assess -ment |
Major risks and opportunities | Risk | Opportu -nity |
Transition | Policy/ Regulation |
Carbon pricing, national carbon emission targets and policies | Large | - GHG emissions are subject to carbon-pricing - GHG emissions are subject to strict regulations at our main manufacturing sites |
● | |
Industry/ Market |
Market changes (customers, governments, markets) | Medium | - The demand for reduction of PFC gas increases with the rise in demand for semiconductors - Demand for semiconductors grows due to the spread of EV, FCV and the advancement of smart technologies and smart societies |
● | ||
Physical | Acute | Extreme weather conditions | Large | - Production stoppages caused by damage to production sites due to heavy rains and typhoons | ● |
Type of Risk |
Medium category | Risk Event | Assess -ment |
Major risks and opportunities | Risk | Opportu -nity |
Transition | Policy/ Regulation |
Carbon pricing, national carbon emission targets and policies | Large | - Increase in manufacturing/operating costs due to carbon taxation and procurement of green energy - Increase in sales costs due to international carbon taxes - Rise in energy procurement costs due to increased levy on renewable energy |
● | |
Regulations and legislation related to global warming prevention | Large | - Tightening GHG emission controls for buildings, condominiums, and plants resulting in expansion of sales of energy-saving products and non-CFC products | ● | |||
Industry/ Market |
Changes in customer companies, governments, and markets | Large | - Increasing demand for products/services that reduce GHG emissions from large buildings, factories, condominiums, etc. | ● | ||
Physical | Chronic | Increase in the average temperature | Large | - Increase in summer air-conditioning costs at production facilities | ● | |
Large | - Increase in demand for air-conditioning equipment among end users | ● | ||||
Acute | Extreme weather conditions | Large | - Production stoppages caused by damage to production sites or disruptions to the supply chain due to heavy rains and typhoons | ● | ||
Large | - Increase in demand for maintenance and replacement of damaged facilities | ● |
Type of Risk |
Medium category |
Risk Event | Assess -ment |
Major risks and opportunities | Risk | Opportu -nity |
Transition | Industry/ Market |
Changes in customer companies, governments, and markets | Large | - Potential inability to meet environmental needs of customers would preclude us from participation eligibility of some bids which could result in order loss | ● | |
- Increase in food demand due to increasing population worldwide and changes in cultivated land due to climate change could lead to increased sales of agricultural-related water infrastructure outside Japan - Increase in orders and sales related to countermeasures for flood damage |
● | |||||
Physical | Chronic | Increase in the average temperature | Large | - Production stoppages caused by damage to production sites due to heavy rains and typhoons - Weather disasters disrupt the supply chain and increase logistics cost - Increase in flooding control measures taken by municipal governments, etc. may result in less demand for pumping stations |
● | |
- Increase in sales due to rising demand for sewerage facilities, river drainage facilities, etc. associated with climate-change caused changes in rainfall patterns - Decrease of water resources in Japan and Southeast Asia will expand demand for water management systems that contribute to water conservation and increase sales |
● | |||||
Acute | Extreme weather conditions | Large | - Production stoppages caused by damage to production sites or disruptions to the supply chain due to heavy rains and typhoons | ● | ||
- Frequent water damage from floods, etc. could cause increase in demand for reinforcing water treatment facilities, river drainage facilities, and agricultural land disaster prevention facilities, potentially increasing sales - Potential for increased sales due to increase in demand for flood countermeasures in urban areas - Potential for increased sales due to increase in demand for remote monitoring and operation stations for water management facilities in order to swiftly respond to flood damage |
● |
Type of Risk |
Medium category |
Risk Event | Assess -ment |
Major risks and opportunities | Risk | Opportu -nity |
Transition | Policy/ regulation |
Carbon pricing, national carbon emission targets and policies | Large | - Regulations regarding CO2 emissions from waste incineration increasing operating costs - Increase in manufacturing costs due to application of carbon tax and carbon pricing to incinerator and boiler manufacturing |
● | |
- Increase in demand for biomass-fired power generation, waste-fired power generation, and waste treatment facilities with carbon capture and storage capabilities | ● | |||||
Industry/ Market |
Changes in customer companies, governments, and markets | Large | - Demand in decrease for waste incineration plants due to further penetration of the 3 Rs (Reuse, Reduce, Recycle) and shift to circular economy with less waste, plastic, etc. | ● | ||
- Increase in demand domestically and overseas for waste recycling technologies | ● | |||||
Technology | Promoting low-carbon, energy-saving, and next-generation technologies | Large | - Increase in R&D expenditures to facilitate new technologies to reduce GHG emissions from waste treatment | ● | ||
- Increase in demand for solutions aimed at achieving carbon neutrality, such as chemical recycling | ● | |||||
Physical | Acute | Extreme weather conditions | Medium | - Supply chain disruption caused by natural disasters | ● | |
- Increase in repair work of damaged facilities - Increase in commissioned treatment requests due to damage to neighboring waste disposal facilities |
● |
4°C and 1.5°C Scenarios by target market
Parameters used in analysis
Main parameters used in climate-related risk analyses by target market
Using our group's financial and non-financial information, public information from the IEA and other countries, and the database of international organizations, we estimated the financial impact of our business in the Oil and Gas Market and the Semiconductor Manufacturing Market due to laws and regulations, changes in markets and technologies, and physical risks.
Financial Impact Assessment Results
Based on the results of the financial impact assessment, we considered measures for climate-related risks and opportunities up to the year 2050.
Strategies for Climate-related Risks and Opportunities
Scenario analyses were conducted with the predicted fiscal 2025 operating profits of each business without taking any climate-related measures as “100”. We then calculated potential operating profits based on whether countermeasures were implemented or not under the circumstances of the risks and opportunities identified.
No action: Predicted financial impact of 4°C scenario and 2°C or less scenario based on making no changes to current products, services, and manufacturing processes
With countermeasures: Predicted financial impact of 4°C scenario and 2°C or less scenario with countermeasures implemented based on identified risks and opportunities
While developing the long-term vision, E-Vision 2030, we used scenario planning to analyze medium- and long-term social and market trends to identify risks. We identified fluctuation risk as a long-term trend and volatility as a short-term risk, we further identified specific risks for each in-house company based on their operating markets. The identified risks and opportunities are managed under our corporate governance system.
Additionally, we identify important risks that the Group faces in the short to medium-term based on the results of risk assessments that are conducted regularly by the Risk Management Division. In the risk assessments, the risk response system for identified risks is reevaluated through questionnaires and interviews with section managers and division managers. The response system is then reconfigured if necessary to more appropriately handle risks identified in the operation.
Important climate-related risks and opportunities identified for each target market are managed by the Non-Financial Management Issues Action Plan and the Management Issues Action Plan. These are concrete plans of action created by executives that span the course of the medium-term management plan E-Plan 2025.
We monitor social and environmental metrics in the Non-Financial Management Issues Action Plan and financial metrics in the Management Issue Action Plan is an action plan for managing economic indicators. The President, Representative Officer, CEO/COO chairs the monitoring meetings and reviews reports received from the in-house company presidents. In addition, the Sustainability Committee confirms the progress of the Group as a whole toward the metrics and targets related to Environmental (E), Social (S), and Governance (G) activities, and establishes action policies for increasing non-financial value.
Climate-related metrics are included in the Non-Financial Management Issue Action Plan. During the period of E-Plan 2025, we will monitor the financial impact of climate-related risks and opportunities, such as contributing to CO2 emission reduction through the provision of energy efficient products and setting goals to develop new products that further contribute to decarbonization.
The Management Issue Action Plan monitors the progress of financial indicators.
We define “non-financial metrics” as metrics that affect social and environmental value, such as the Group’s CO2 emissions and contributions to reductions through products and services.
We have set non-financial metrics and targets in our medium-term management E-Plan 2025, which began in 2023, and are monitoring progress. We also monitor our progress in creating social and environmental value.
The Non-Financial Management Issues Action Plan for the period from 2023 to 2025 sets targets for each fiscal year until 2025 by backcasting from performance targets for 2030 and includes metrics and targets for climate-related risks and opportunities for each target market identified by climate-related scenario analysis. Furthermore, we are aiming to commercialize new businesses, through developing hydrogen-related products, inland aquaculture systems, and cultured meat production systems, to resolve various social issues, including climate-related risks and opportunities.
We have set a target to reduce GHG by 100 million tons in CO2 equivalent by 2030. Other outcome targets also relate to climate-related transition and physical risks. We are promoting measures to achieve our performance targets.
We have determined 5 Material Issues facing the EBARA Group in our long-term vision E-Vision 2030. Three of these issues relate directly to risks and opportunities arising from climate change.
We have set KPIs and targets regarding climate-related risks and opportunities up until the year 2030 based on the climate-related scenario analyses we have conducted.
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