Sustainability

Response to Climate Change

Using the adoption of the Paris Agreement in 2015 as an opportunity, the Company—its stated mission in summary being to “contribute to the development of society”—revised its environmental policy in 2016 amid the rapidly growing global interest relating to climate change. We are aiming to achieve both the development of society through the proliferation of products that contribute to reducing CO2 emissions and environmental impact, and the resolution of environmental issues such as climate change.

In November 2022, the Company announced its endorsement of the final report of the Task Force on Climate-related Financial Disclosure (TCFD). In addition to identifying, analyzing, and evaluating the risks and opportunities that climate change poses to management, we are working to enhance the quality and quantity of information disclosure that contributes to engagement (constructive dialogue) with all stakeholders, including shareholders and investors.

Governance

At a Board of Directors’ meeting held in October 2022, a resolution was passed to establish a Sustainability Promotion Committee, and full-scale operations are scheduled to begin in April 2023. The Sustainability Promotion Committee will submit proposals, reports, and provide information on matters related to ESG management, including responses to climate change. The Committee will also be subject to regular oversight by the Board of Directors.
The Board of Directors gives consideration to climate-related issues when reviewing medium-term management plans and making investment decisions.

Please refer to the page of Sustainability Management for Sustainability Promotion Structure.

Risk Management

The Sustainability Promotion Committee identifies, assesses, and manages risks related to climate change.
In scenario analyses, the Committee extracts the relevant parameters to identify risks and conducts assessments on a regular basis. The Committee also manages risks by quantitatively evaluating the financial impact of each risk.
Going forward, we will report the results of risk assessments in scenario analyses to the department in charge of risk management and link them with company-wide risk management.

Strategies (Scenario Analysis Overviews)

Scenario Analysis Overviews

Through scenario analyses, the Group ascertained the changes in the Group and its customers’ industries in 2030 and 2050—under the 1.5°C/4°C scenarios, based on scientific information such as from the International Energy Agency (IEA)—and analyzed climate change risks and opportunities. In all of the scenarios used in these analyses, we confirmed that resilient management is possible in the businesses targeted for analysis.
Under the 1.5°C scenario, a major change in policy toward decarbonization is assumed. In addition to the introduction of a carbon tax, soaring raw material and energy costs will require a shift to a more decarbonized business model. In contrast, in the 4°C scenario, the impact of physical risks will increase, and it will be necessary to respond to risks such as plant shutdowns and supply chain disruptions.

Scenario Analysis Results

Based on the previous section’s vision of future society with a 1.5°C rise, the Group recognizes that while business opportunities will increase due to increased demand for energy-saving products, the impact of physical risks will increase at 4°C.

Based on the results of these analyses, the Group will sequentially verify initiatives for maximizing opportunities while addressing recognized risks, starting with those with the highest feasibility, and promote reflecting and integrating those initiatives into management strategies.

Opportunities		Details of opportunity	Degree of impact		Countermeasures
Main Category	Middle Category	Details of opportunity	1.5℃ scenario	4℃ scenario	Countermeasures
Development of energy-saving products	Products that save more energy	In accordance with energy-saving policies and rising temperatures, electrification and automation at customer factories will advance, demand for products that raise productivity and improve energy-saving performance in factories and at facilities will increase	Large	Small	Expand local production for local consumption business models, such as local manufacturing and sales of parts and repair parts that have already started in some regions, and consolidation of production bases. Introduction of eco-friendly electrification products, design and development of products for which lightness and longevity have been taken into account, etc.
Development of energy-saving products	Demand to save manpower	In accordance with declining labor productivity due to rising temperatures, demand for labor saving and efficiency improvement at production sites will increase	Small	Small	Development of products for automated warehouses, automated guided vehicles, etc.

Transition risks

Risk		Details of risks	Degree of impact		Countermeasures
Main Category	Middle Category	Details of risks	1.5℃ scenario	4℃ scenario	Countermeasures
Carbon price	Scope 1, 2	Increase in manufacturing costs due to introduction of carbon taxes in each country, emissions trading, and border carbon adjustment measures	Medium	Small	Setting of carbon emission reduction targets such as carbon neutral declarations Ascertaining of Scope structure for carbon emissions, building a monitoring system, etc.
Raw material cost	Scarce resources	Increased procurement costs due to restrictions placed on raw materials and purchases due to emission regulations	Small	Small	Renewal of aging robots, etc., promoting the reuse and recycling of equipment and parts through remodeling and repair services, etc.
Raw material cost	Cost of plastic	Increased costs for materials containing plastic due to regulatory restrictions placed on their use and requirements that recycled plastic be used	Medium	Small	In addition to reviewing excessive packaging in product packaging, reducing the amount of plastic used by switching to recycled paper and returnable boxes, etc.
Energy cost	Electricity cost	Electricity costs are increasing due to decarbonization of the Company’s plants and offices as well as popularization of renewable energy	Medium	Medium	Promotion of energy saving by installation of LED lighting, etc. Examining installation of in-house power generation equipment (solar power generation equipment) and the utilization of leasing services Introduction of optimal operation by means of Energy Management System from buildings and plants where already being installed or considered, gradual expansion to locations places where not yet introduced
	Air-conditioning cost	Due to rising temperatures, operating rate of air conditioning in plants, etc. rises, and thus air-conditioning costs increase	Small	Small	Operational improvements, including ventilation reviews, measures against air leaks, and measures to shade external air-conditioning units Installation of energy-saving air-conditioning equipment, etc.
	Distribution cost	Distribution cost rises due to shift to EVs for large vehicles	Medium	Medium	Consolidate production bases and expand initiatives with customers (OEMs) for joint transportation in some businesses to streamline inter-factory transportation Examine expanding distribution by multidrop (milk run) shipments of goods to suppliers in the region, etc.

Physical risk

Risk		Details of risks	Degree of impact		Countermeasures
Main Category	Middle Category	Details of risks	1.5℃ scenario	4℃ scenario	Countermeasures
Physical cost	Restoration/operating costs	Increasing costs from expenses for restoring equipment following the effects of abnormal weather, etc.	Small	Large	Implementation of risk reduction through multiple purchasing Advance arrangements in line with business content so that a certain level of production activity can be carried out even if supply is interrupted, appropriate inventory management and thorough operation, etc.

Indicators and Targets

Curbing global warming by reducing CO2 emissions is becoming an essential activity for realizing a sustainable society. To fulfill its responsibility, the Hirata Group is promoting measures to reduce CO2 emissions in its business activities. As a goal for reducing the environmental impact of our business activities, we are also considering more in-depth global, medium- to long-term goals while referring to the greenhouse gas reduction target announced by the Japanese government in April 2021. In the years to come, we will carefully examine the indicators that are important to the Group from the risk and opportunity items in the scenario analyses, while continuing to monitor CO2 emissions (Scope 1, 2, 3).

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