Information Disclosure Based on the TCFD Recommendations
Climate Change Measures as Part of the Management Strategy
Subsequently, SHIONOGI established a project involving its management strategy and procurement-related departments. Considering the social trends toward decarbonization and with reference to the TCFD framework, scenario analyses were conducted using two temperature ranges—1.5°C and 4°C. SHIONOGI developed climate change strategies based on these analyses, including the assessment and identification of risks and opportunities, evaluation of financial impacts, and development of risk response policies. These strategies have been publicly available on our website since April 2023.
Governance Structure and Risk Management of SHIONOGI
By serving as the chairperson of the SHIONOGI Group Central EHS Committee*2 and the Energy Conservation Committee*3, the Chief EHS Officer ensures that the risk response to climate change is promoted as part of enterprise risk management. These committees are held at least four times per year. Decisions made by these committees are reported to the President and CEO, and matters requiring higher-level deliberation are submitted in advance to the Executive Management Meeting and subject to resolution by the Board of Directors or other governing bodies, thereby establishing a structure that enables thorough and continuous deliberation.
(Risk Management: Recommended disclosure c)
*3 Energy Conservation Committee: A subcommittee under the SHIONOGI Group Central EHS Committee focusing on climate change and energy conservation issues.
Review of SHIONOGI’s Climate Change Strategy
Process for Identifying and Assessing Risks and Opportunities and Developing Countermeasures
Methodology of Scenario Analysis
• 1.5°C Scenario: The average global temperature increase is kept below 1.5°C by 2100 compared with preindustrial levels.
‒ Reference scenarios: IEA*⁴-NZE, IPCC*⁵-1.5, IPCC AR6 SSP*⁶1-1.9, etc.
‒ More rigorous measures (e.g., carbon taxes and environmental regulations) are introduced, and society proactively engages in climate action.
・4°C Scenario: The average global temperature rises by 4°C by 2100 compared with preindustrial levels.
‒ Reference scenarios: IPCC AR6 SSP3-7.0/SSP5-8.5, etc.
‒ No stringent measures are introduced, leading to more severe and frequent natural disasters in a “business-as-usual” world.
*5 IPCC: Intergovernmental Panel on Climate Change
*6 SSP: Shared Socioeconomic Pathway
External environment surrounding SHIONOGI |
1.5°C scenario | 4°C scenario |
|---|---|---|
| Policies and regulations | Stronger policies to achieve carbon neutrality by 2050 (such as introducing a carbon tax, increasing the renewable energy ratio, and stepping up energy conservation efforts) | More powerful policies to deal with catastrophic disasters (regulations, subsidies, and other policy support) |
| Investment/lending institutions | Requests more demanding than policies toward carbon neutrality | Although there is pressure to respond to the deteriorating natural environment as climate change advances, the pressure is not strong enough to affect investment and lending decisions |
| Society | Changes in values (consumption propensity) brought about by a decarbonized society | The same situation as the current one |
| Natural environment | Gradual changes in the climate | More severe and frequent natural disasters and changes in precipitation patterns |
Scope of Scenario Analysis
| Classification | Main risks and opportunities | Details of the anticipated risks and opportunities | Single-year financial impact for FY2030*7 | |||
|---|---|---|---|---|---|---|
| 1.5°C scenario | 4°C scenario | Remarks | ||||
| Transition risks | Policy | Introduction of carbon pricing | New regulations put in place on manufacturing, procurement, and other business activities, such as introducing and expanding carbon taxes, emissions regulations, and emissions trading systems | Medium | Small | Approximately 6.9 billion yen*8 in the anticipated worst case scenario for Scopes 1-3 of SHIONOGI (in the 1.5°C scenario) |
| Tougher energy-saving regulations | Energy-saving regulations for manufacturing facilities becoming tougher than the annual average reduction of 1% or more in energy consumption per unit required by the current Act on Rationalization of Energy Use and Shift to Non-fossil Energy, resulting in additional capital investment | Small | Small | |||
| Physical risks | Acute | Impact on raw material procurement due to locally abnormal weather and rising temperatures | Procurement of biological raw materials becoming difficult because of the adverse effects of rising temperatures on growth and yield, quality, price, and other factors | Large | Large | The identified risk is based on the assumption that lysate reagents used in quality testing are unavailable |
| Damage to supply chain facilities due to intensifying storm and flood damage | Disruption or suspension of supply chain operations caused by locally abnormal weather (such as typhoons and sudden downpours) and associated disasters (equipment damage, flooding, power outages, and other damage) | Small | Small | |||
| Chronic | Rising sea levels | Plants or other operating sites becoming inoperable due to rising sea levels | Large | Large | The identified risk is based on the worst case scenario in which an operating site, such as a plant, must be relocated | |
| Opportunities | Market | Cultivation of new markets and regions through research and development of new medicinal products | Application of the technologies and expertise that SHIONOGI has cultivated to the treatment of other diseases | Small | Small | The identified opportunity is based on the assumption that drugs to treat NTDs (Neglected Tropical Diseases) will be developed and launched |
| Switching to ecofriendly low-carbon containers and packaging | Cost reduction resulting from replacement with environmentally friendly packaging materials | Small | Small | |||
*7 Financial impact: Large: 10 billion yen or more; Medium: 1 billion yen to less than 10 billion yen; Small: less than 1 billion yen
*8 The estimated figure is based on a carbon tax internally set at 20,320 yen/tCO₂, with reference to the IPCC Special Report on Global Warming of 1.5°C.
Assessing and Identifying Risks and Opportunities
Table 2 presents the results of our assessment of climate-related risks and opportunities using the 1.5°C and 4°C scenarios.
We identified three items as risks and opportunities stemming from climate change with relatively large financial impact:
1. Introduction of carbon pricing
2. Impact on raw material procurement because of locally abnormal weather and rising temperatures
3. Rising sea levels
If all the identified risks and opportunities materialized, the negative financial impact on the core operating profit targeted for 2030—the final fiscal year of SHIONOGI’s medium-term business plan STS2030—was estimated to be limited to approximately 10%.
As the STS2030 Revision, updated in June 2023, aims for further earnings growth compared with the original STS2030, we consider our business resilience to be well ensured against future climate change scenarios.
| Identified risk | Classification of risk response policy | Remarks on established policies |
|---|---|---|
| Introduction of carbon pricing | Risk reduction | The possibility of the identified risks becoming reality in the medium term is relatively high, since carbon pricing has already been introduced in some countries and is under consideration in Japan. Therefore, we will mitigate the risks by implementing medium- to long-term activities to reduce our greenhouse gas (GHG) emissions. |
| Impact on raw material procurement due to locally abnormal weather and rising temperatures | Risk retention | We have defined the worst case scenario as the situation where quality testing cannot be conducted because lysate reagents made from the blood components of horseshoe crabs cannot be procured due to their decreasing population caused by climate change, leading to the suspension of shipments of some of our main medicinal products. However, reagent manufacturers are engaged in activities to preserve horseshoe crabs. Also, even if procurement of lysate reagents becomes difficult, alternative reagents using genetically modified proteins exist. Therefore, although the long-term possibility cannot be ruled out, we will retain the risk, judging that the probability of the risk manifesting by 2030 is extremely low at this point. |
| Rising sea levels | Risk retention | There is no doubt about the long-term trend of rising sea levels caused by climate change, and we have set the worst case scenario as the situation where sea level rise may adversely affects operations at some of our key manufacturing sites located in particularly low-lying areas. However, the average sea level rise along the coasts of Japan over the period from 2031 to 2050 is projected to be less than 0.2 m. Therefore, although the long-term possibility cannot be ruled out, we will retain the risk, judging that the probability of the risk manifesting by 2030 is extremely low at this point. |
Carbon Tax (Carbon Pricing)
Metrics and Targets for SHIONOGI’s Climate Change Countermeasures
As mentioned above, using the TCFD framework, SHIONOGI conducted a detailed assessment of the impact of climate change on its business. Based on the evaluation of strategies and specific countermeasures, SHIONOGI has established “reduction of GHG (CO₂) emissions” as a key metric for mitigating climate-related risks.
In response to the Japanese government’s declaration of “Carbon Neutrality by 2050” and global efforts to reduce GHG emissions, SHIONOGI recognizes the importance of achieving carbon neutrality by 2050.
In light of this, SHIONOGI will continue to advance its initiatives by setting GHG emission reduction targets, including SBTs*9, as part of its medium- and long-term EHS Action Targets.
・Metric:
‒ Reduction of GHG (CO₂) emissions (FY2019 baseline)
・Targets:
‒ Reduce GHG emissions (Scopes 1 and 2) by 10% by FY2024
‒ Reduce GHG emissions (Scopes 1 and 2) by 46.2% by FY2030
‒ Reduce GHG emissions (Scopes 1 and 2) by 60% by FY2035
‒ Reduce GHG emissions (Scope 3, Category 1: Purchased products and services) by 10% by FY2024
‒ Reduce GHG emissions (Scope 3, Category 1: Purchased products and services) by 20% by FY2030
‒ Increase the share of renewable energy-derived electricity to 90% or more by FY2030
To improve energy efficiency, SHIONOGI also aims to improve energy intensity (energy use per unit of output) by 1% annually and introduce highly energy-efficient equipment.
Please refer to "Climate Change" for the yearly activity progress.
・Additional Climate Change Targets:
‒ Reduction of energy consumption and improvement of energy efficiency
‒ Promotion of energy conservation efforts to reduce energy intensity by 1% per year
‒ Promotion of introduction of highly energy-efficient equipment
‒ Reduction of GHG emissions
‒ Promotion of transition to non-fossil energy sources
‒ Promotion of introduction of highly energy-efficient equipment
