Our basic approach and strategy
Background and approach of TCFD initiatives
The impact of climate change which is increasing every year is becoming more serious and is being recognized as the biggest risk in human history by the international community. Under the Paris Agreement reached at the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21) in December 2015, it was agreed to keep the increase in global average temperature to well below 2℃ above the pre-Industrial Revolution level.
The Task Force on Climate-related Financial Disclosures (TCFD) disclosed its final report in June 2017 as recommendations to encourage disclosure of climate-related financial information by corporations to allow investors to make appropriate investment decisions. The content of the report is globally recognized as an important framework for disclosure of information on climate change. Under TCFD, corporations need to consider the risks and opportunities of climate change and make disclosures in the areas of “Governance,” “Strategy,” “Risk Management,” and “Metrics and Targets.” “Strategy” also requires disclosure of results of analysis including climate scenarios that keep the increase in temperature to below 2℃.
Unicharm recognizes that climate change is an issue to be worked on as a priority. Therefore, in order to contribute to achieving the 2℃ scenario in the Paris Agreement, we received certification under the Science-Based Targets (SBT) initiative for our CO2 reduction plans up to 2050 in June 2018. We also expressed our endorsement of TCFD in May 2019 and will continue to report in accordance with the TCFD framework going forward.
To achieve a “zero-CO2 emissions society by 2050,” top management will take the lead on setting targets and managing progress which each and every member of the Group will pursue through business activities. As well as striving to reduce CO2 emissions associated with the diverse business activities of our own company, we will continue actively encouraging all those involved in the supply chain to reduce emissions throughout the product life cycle. We will also continue to pursue these activities in partnership with all stakeholders.
Unicharm regards risks and opportunities related to climate change as important elements in business strategy. In particular, researchers have pointed out that the Asian region, where our company focuses its business activities, will be affected most if climate change mitigation and adaptation measures are not implemented. In one example, a joint research team from Stanford University and the University of California in the United States pointed to this impact in a report of research results published in the “MIT Technology Review” in 2017.
Given this, in 2018, Unicharm independently estimated the financial impact of energy based on the “450 Scenario” of the International Energy Agency (IEA) and the operational impact due to physical risk based on the “RCP2.6 Scenario” of the Intergovernmental Panel on Climate Change (IPCC).
When planning the scenarios, we selected two axes with high levels of uncertainty,
- “Relationships between nations” in which there is ongoing international cooperation or there is no international cooperation as each country follows its own country first policy
- “Policy and human awareness” in which people's environmental awareness increases with the impact of climate change and environmental policies are implemented or economic growth is prioritized over the environment in both people's awareness and policy
and drew up four different scenarios (important driving forces considered to have a major impact on the scenarios are assumed to be women's participation, urban concentration, waste issues, ESG investment, use of renewable energy, etc.) From these, we have selected three scenarios which are the “2℃ Scenario”, “Greater than 2℃ Scenario” and “Ego-System Economy First Scenario” and examined the challenges for 2030/2050 in each scenario.
Prices of forest-derived raw materials will rise moderately and energy prices will rise sharply. The GDP of the Asian region will grow moderately and Unicharm's ROE will stay at current position and we will be able to maintain CAGR 7%. Markets will also expand over the ultra-long term and our performance will also increase (sustainable growth and expansion outside of Asia).
Greater than 2℃ Scenario:
Prices of forest-derived raw materials will rise quickly, but increases in energy prices will be curbed. Costs will rise relatively, but GDP growth in the Asian region will also accelerate and Unicharm's ROE will also rise with upturn in CAGR 7%. Over the ultra-long term, the market will contract due to extreme weather (not sustainable).
Ego-System Economy First Scenario:
Climate change will be further amplified, so restrictions will be imposed on procurement of forest-derived raw materials. However, there will be economic development with increases in both sales prices and volumes. Over the ultra-long term, major revisions of business strategy will be required due to very extreme weather.
Global warming not only impacts the global environment, but also deeply affects Unicharm's business. Unicharm will continue to work in partnership with diverse stakeholders to implement actions in compliance with the Paris Agreement. We believe that our “technology for recycling used disposable diapers” can be more widely used in the face of severer global warming. We will continue contributing to forest protection and decarbonization by means of this technology.
Unicharm has positioned appropriately identifying various risks, including climate change, and developing and operating a comprehensive management system for risks, including prevention of such risks, minimization of their impact and prevention of their recurrence, as an important management theme. Therefore, as well as developing and implementing a Group-wide risk management system, we continually review and improve the ESG system*.
The Board of Directors regularly analyzes and evaluates the various risks surrounding the Group, gives directions within the company to take measures as necessary and supervises improvements. The ESG Committee also analyzes and examines various important risks and implements improvements in partnership with business and functional divisions.
In particular, as it is necessary to understand climate change risks from a long-term perspective, we are working to enhance organizational capacity to deal with high levels of uncertainty including the scenario planning described previously.
Metrics and Targets
As stated previously, with regard to the setting of CO2 reduction targets, Unicharm received certification under the Science-Based Targets (SBT) initiative for our reduction plans up to 2050 in June 2018. To this end, we set specific long-term reduction targets for both “Scope 1” (direct emissions: own plants, offices, vehicles, etc.) and “Scope 2” (indirect emissions from energy sources: energy consumed by the Group such as electricity).
|CO2 Emissions||As our management indicators, we will aim for a 90% reduction to Scope 1 (direct emissions: own plants, offices, vehicles, etc.) and a 30% reduction to Scope 2 (indirect emissions from energy sources: energy consumed by the Group such as electricity), both compared to 2016 by 2030.|
Eco Plan 2020, goals and results of measures against climate change (from “Eco Plan 2020”)
|■Environmentally-Friendly Products (Japan)||72%||78%||80%||86%||93%||89%||×||100%|
|■Products with the Eco Charming label (Japan)||50%||56%||58%||66%||60%||66%||○||60%|
|■Products with the Eco Charming label (Overseas)||0%||Survey||Understanding Completion||Operation Start Delay||Operation Start||Operation Start||○||Operation Start|
|■CO2 emissions base unit during manufacturing compared to 2015 (Japan)||Base year||-2.4%||-4%||-6%||-8%||-8%||○||-10%|
|■CO2 emissions base unit during manufacturing compared to 2015 (Overseas)||Base year||-||-3%||-6%||-8%||-8%||○||-10%|
|■Collection of overseas site data (compared to sales)||73%||77%||81%||83%||85%||88%||○||80%|
Third party assurance
In order to increase the reliability of non-financial data, we are receiving Third party assurance from PwC Sustainability LLC, based on ISAE3000/3410.
[Japan] CO2 emissions throughout the supply chain (overall picture of Scope 1 - 3)
Our company (in Japan) estimates its CO2 emissions according to the Greenhouse Gas Protocol*, the standard for calculating greenhouse gases (GHG) most widely used in the world today.
The results of calculations following this standard indicate that 47% of Unicharm's emissions are from materials procurement and 33% from the disposal of products after use. We will continue to carry out activities aimed at establishing a low-carbon society.
* In 1998, the GHG Protocol Initiative was established as a meeting for developing standards of calculating and reporting GHG primarily by the World Resources Institute (WRI), an environmental NGO based in the United States, and the World Business Council for Sustainable Development, comprising 200 multinational corporations.
In 2001, version one of the GHG Protocol was established and since then this approach to GHG calculation has become a worldwide standard.
CO2 emissions by Scope (Japan)
|Scope 3||1||Purchased goods and services||771|
|3||Fuel- and energy-related activities||2.7|
|4||Upstream transportation and distribution||48|
|5||Waste generated in operations||1.1|
|8||Upstream leased assets||1.1|
|9||Downstream transportation and distribution||not applicable|
|10||Downstream-processing of products sold||not applicable|
|11||During product use||not applicable|
|12||End-of-life treatment of products sold||✓531|
|13||Downstream leased assets||not applicable|
|Scope 3 total:||1,441|
|Scope 1, 2 and 3 total:||1,607|
[Japan and overseas] CO2emissions from corporate activities (Scope 1 and 2)
In fiscal 2019, CO2 emissions were 25,000 tons for Scope 1 and 447,000 tons for Scope 2. Going forward, we will promote activities to lower CO2 emissions in each country and region and work to lower base unit per net sales.
Reducing CO2 emissions
In fiscal 2019, we did not add any new business sites to the data range for non-financial audit. As a result of these activities, we were able to lower the base per unit and reduce emissions in countries within the existing data range. In each country, the results reflected the accomplishments of energy conservation initiatives, but we are continuing to promote emissions reduction activities.
- Scope 2 emissions for fiscal 2018 were revised due to the revision of the electricity emissions coefficient.
[Overseas] Achieving 100% renewable energy use at Brazil Factory (Scope 2)
At the Brazil Factory, renewable energy provides all the electricity and we are promoting activities to reduce CO2 emissions.
[Japan] Initiatives to reduce CO2through products (Scope 3, Categories 1, 4 and 12)
Framework of environmentally-friendly products
Our company has set a target ratio for environmentally-friendly products as part of its environmental goal and is working on product development by having an environmentally-friendly mind. Products with improved environmental performance are defined as “environmentally-friendly products”* based on an evaluation of whether environmental impacts are successfully reduced within the life cycle from the baseline figures of FY2005. Certification is based the LCA(Life Cycle Assessment) CO2 volume calculated by the ESG Division which is independent from development departments. In 2019, we achieved our goal of 89% environmentally-friendly products. In 2020, we will work to further increase this percentage.
Additionally, Eco Charming products are a further evolved version of environmentally-friendly products defined as top tier products that help contribute to the realization of a sustainable society. As of today, a total of 161 items fulfilled this definition (certification was extended to pet care products and institutional-use products in addition to personal care products starting in 2017).
Going forward, we will continue to introduce environmentally-friendly products as a means to lowering CO2 emissions of procured materials and reducing CO2 emissions during product disposal after use.
An example of Eco Charming products
Example - Sanitary Product
Sofy Ultra-Sound-Sleep Best-Fit Slim, a newly released product from the Sofy Ultra-Sound-Sleep brand of nighttime feminine napkins, features two-thirds the thickness of the ordinary Sofy Ultra-Sound-Sleep Guard. This means the product weighs 84.0% of conventional products and as a result CO2 emissions from manufacturing and distribution processes are 82.4% of usual.
[Japan] Sharing importance of measures against climate change with suppliers (Scope 3 Category 1)
At the Quality Policy Briefing Session held with suppliers in November 2017, we presented “Eco Plan 2020” as support for procurement of sustainable materials. 70% of CO2 emissions comes from materials procurement and from disposal of products after use. Once again, we came to realize the importance of tackling these together with suppliers. Going forward, we will require cooperation in introducing environmentally-friendly products.
[Japan and overseas] Initiatives to reduce waste at production sites (Scope 3 Category 5)
At our overseas subsidiary in Thailand, we installed facilities to crush out-of-scope products from the production process, with more than 99% of the waste generated at the site being recycled. In conjunction with domestic recycling activities, we have achieved zero landfill waste.
[Japan] Initiatives to reduce CO2in distribution and retail (Scope 3 Category 4 and 9)
Unicharm Products is actively promoting initiatives to build a sustainable distribution system. Specifically, it has been working with customers to shorten transportation distances, reduce the volume of movement between production sites or warehouses, promote modal shift and enhance loading efficiency by making corrugated cardboard sizes smaller and streamlining pallet modules as well as other measures. The aforementioned initiatives not only make distribution more efficient, but are also effective for reducing CO2. In fact, we achieved CO2 emissions in FY2019 that were 98% compared with those in FY2018 (a reduction of 1,091 ton-CO2). Going forward, we will continue promoting further initiatives aimed at building a sustainable distribution system and reducing our environmental impact.
Submission of White Logistics Movement voluntary action declaration
In September 2019, Unicharm endorsed the “White Logistics Movement” advocated by Japan's Ministry of Land, Infrastructure, Transport and Tourism, Ministry of Economy, Trade and Industry and Ministry of Agriculture, Forestry and Fisheries and submitted a voluntary action declaration. The White Logistics Movement aims to enhance productivity in truck transportation and create greater logistics efficiency while also looking to realize a “white” labor environment that makes work easier for female drivers and those over the age of 60. At the Kyushu Factory and Logistics Center, the first new such facility for 26 years, we have introduced automated warehousing and container loading robots with an eye on “smart logistics.” We are achieving “people-friendly logistics with enhanced productivity” through “automation and labor saving.”
Details of initiatives in Unicharm's voluntary action declaration
|Initiative item||Initiative details|
|Logistics improvement proposals and cooperation||When we receive a request or consultation on logistics improvement from a supplier or logistics company, we respond to the discussion sincerely and also make positive proposals ourselves.|
|Use of pallets, etc.||We strive to reduce the burden of cargo handling work and shorten work time by using pallet transport.|
|Advance provision of receiving and shipping information from shipper||We work to increase ordering well in advance in partnership with suppliers.|
|Modal shift to shipping and rail||By promoting a shift from trucks to use of ferries, roll on/roll off ships and rail for long distance transportation, we are working to reduce environmental impact.|
|Fuel surcharges||We will continue operating fuel surcharges going forward.|
|Expansion of production items between sites||We are promoting the expansion of production items at each production site to reduce transportation between sites.|
Acquisition of Eco Rail Mark
Unicharm is promoting “modal shift” as an initiative to reduce CO2. As part of this, we have expanded environmentally-friendly rail transportation primarily for long-distance transport between Fukushima Factory and Shikoku Factory. In July 2019, we acquired the “Eco Rail Mark” corporate certification.
Received “Minister of Economy, Trade and Industry Award” at Green Logistics Partnership Conference, Excellent Logistics Commendation Program
As an initiative to reduce CO2 by improving transportation efficiency, we are also promoting “collaboration with other companies” together with reducing the impact of retail store operations. In December 2019, the three-company initiative for the “joint delivery of storefront sales promotional materials” by Unicharm, Shiseido and Lion was recognized and received the “Minister of Economy, Trade & Industry Award,” the top award at “Green Logistics Partnership Conference, Excellent Logistics Commendation Program 2019” sponsored by Ministry of Economy, Trade & Industry, Ministry of Land, Infrastructure, Transport & Tourism and industry.
Evaluated by CDP Japan 500*for disclosure of climate change information
Unicharm cooperates with a survey of 500 companies selected for their inclusion in the FTSE Japan Index as part of its efforts to address CDP climate change. In fiscal 2019, Unicharm received a score of B. This indicates that the PDCA cycle for climate change is functioning at a high level to address our company's overall efforts. Unicharm was also recognized for moving forward with information disclosures to shareholders. Going forward, Unicharm will continue to carry out activities that are even more mindful of climate change.
- CDP (Carbon Disclosure Project): An international NGO that works to realize a sustainable society by conducting global surveys on the environment and by disclosing information
Participation in Japan Climate Initiative (JCI) since its establishment
The Japan Climate Initiative (JCI) was launched in Tokyo on July 6, 2018 and Unicharm has endorsed its declaration, “Joining the front line of the global push for decarbonization from Japan”, and has participated in the JCI. Unicharm will strive to achieve the COP21 Paris Agreement while collaborating with companies, local governments, organizations, NGOs and others that are working proactively on measures for climate change.
[Japan] Utilization of SBT activities as a concrete climate change mitigation plan
In order to draft concrete climate change mitigation plans, our company has endorsed SBT (Science-Based Targets), an international initiative, in May 2017 and uses the SDA tool (Ver. 8) to perform simulations up to 2050 and to draft reduction plans. In June 2018, in consultation with SBT, we received Japan's 17th certification for a plan that is aligned with the 2℃ target.
[Japan] Commendation of initiatives aimed at establishing a low-carbon society
“The Carbon-Free Challenge Cup” is a program for commending the daily activities of various organizations (schools, corporation, local governments, NPOs, etc.) for preventing global warming in an attempt to build a carbon-free society for the next generation. The program shares know-how and information about excellent initiatives taking place across Japan and fosters cooperation and motivation for further activities. The year 2020 marks the tenth year of the program.
As a partner that advocates for the initiatives of “the Carbon-Free Challenge Cup,” in 2016, we established the “Unicharm Eco Charming Award for Excellence” to be presented to companies or organizations.
At “Carbon-Free Challenge Cup 2020,” after presentations by 28 finalists, the Unicharm Eco Charming Award was presented to “Realizing a Society that Builds a Rich Relationship between Humans and Nature” by Hyogo Prefectural Sumoto Industrial Senior High School.
Hyogo Prefectural Sumoto Industrial Senior High School has been working on research into renewable energy utilization aimed at realizing a carbon-free society for nine years and striving to create sustainable systems. As part of the initiative, the school has installed 13 windmill-powered street lights and three water mill-powered street lights together with local residents. These activities have increased public awareness about the environment and conserving energy.
Unicharm selected the activities carried out by those at Hyogo Prefectural Sumoto Industrial Senior High School for the “Unicharm Eco Charming Award for Excellence” recognizing that they are contributing to the realization of a carbon-free society as well as providing a model case leading to the “realization of cohesive societies” for which Unicharm is working.
[Japan] Introduction of SDGs-related activities at “EcoPro 2019”
Unicharm exhibited at “EcoPro 2019” which was held at Tokyo Big Site from December 5 to 7, 2019 with the theme “Toward a Sustainable Society”.
This year, we used the theme of “product life cycle with eco” for our exhibits and provided a summary of the environmental promotion activities in which the Unicharm Group engages alongside the product life cycle. We also featured individual panels for some of them. These included (1) the manufacturing method of Paper-sand®, (2) the use of renewable energy at the Jaguariuna Factory of Unicharm Do Brasil (Brazil), (3) tray mats that help to reduce food loss and (4) the recycling method for used disposable diapers.
During the exhibition, more than 5,000 people, including children and students on their social studies field trips, visited Unicharm's booth to look at the panels and samples.