With numerous major disasters occurring around the world due to extreme weather events, we consider climate change to be the most important issue we face. OMRON is committed to the challenge of creating carbon-neutral societies as described in our Shaping the Future 2030 vision, launched in fiscal 2022.
Since announcing our endorsement of the Task Force on Climate-related Financial Disclosure (TCFD) recommendations in February 2019, we have disclosed information based on the TCFD framework to strengthen engagement with shareholders, investors, and other stakeholders regarding climate change initiatives.
The TCFD recommends all companies disclose information based on the four thematic areas: governance, strategy, risk management, and metric and targets. The OMRON Group discloses climate-related initiatives in line with these four thematic areas of the TCFD recommendations.
In the OMRON Corporate Governance Policies, we clearly state that the board of directors determines and discloses sustainability policies, material Issues, and targets, including efforts to address climate change risks based on the TCFD and other frameworks.
The Executive Council and the Sustainability Committee meet regularly to discuss, decide, manage progress, and monitor climate change-related risks identified through scenario analysis for each business in conjunction with SF2030 in line with our TFCD declaration and medium-term management plan, business opportunities, targets, and specific measures, considering corrective measures as necessary. The board of directors regularly receives reports on the details discussed and decided by the Executive Council, discussing and overseeing matters reported.
The Company used greenhouse gas emissions reduction indicators and third-party assessments of sustainability indicators including evaluation of climate change response (Dow Jones Sustainability Indices) as part of medium- and long-term performance-linked compensation (stock-based compensation) for internal directors and executive officers covering fiscal 2021 through 2024.
Under our long-term vision SF2030 and our medium-term management plan, we identified carbon neutrality and reducing our environmental impact as sustainability-related materialities, viewing climate change from the two aspects of opportunity and risk to put our corporate social responsibility into practice and build further on our competitive advantage.
To prevent the serious impacts of climate change on ecosystems and human society from spreading, we engage in measures to reduce greenhouse gas emissions throughout our entire supply chain. We accomplish this goal through efforts that include the following five measures: (1) Products and services that contribute to decarbonization, (2) Evolved business models that combine products and services, (3) Co-creation with our partners, (4) Improved energy efficiencies, and (5) Expanded use of renewable energy.
In this context, the OMRON Group analyzed risks and opportunities under two scenarios published by the Intergovernmental Panel on Climate Change and International Energy Agency (average global temperature rise of 4℃ or more; and average global temperatures held to 2℃ or lower as provided in the Paris Agreement (portions to 1.5℃ or less). In this way, we reaffirmed that a response from OMRON is necessary to solve the climate change problem. In the field of industrial automation, specifically, OMRON endeavors to evolve innovative-Automation! to create manufacturing sites that support a sustainable future in coexistence with the global environment and job satisfaction for workers. We aim for automation that increases productivity and energy efficiency. In terms of social solutions, we have contributed to the spread of solar power and storage batteries. In the future we will use advanced energy control technology to eliminate instability in power generation and contribute to the further spread of renewable energy. In the field of device and module solutions, we speed the development and market introduction of Electronic and Mechanical Components Business components in response to growing interest in improved environmental performance and carbon footprint reductions. The OMRON Group has various other points of contact with society, and we are dedicated to achieving carbon-neutral societies in many social aspects.
In fiscal 2022, the OMRON Group became the first Japanese manufacturer to join EP100 and committed to doubling our energy productivity—or the ratio of sales per gigawatt-hour (GWh)—at all production sites in our Industrial Automation Business and Healthcare Business by 2040 compared to 2016. Our Matsuzaka Plant is a Japanese production center for blood pressure monitors and thermometers. Here, the Industrial Automation Business and the Healthcare Business are working together to create a system to double production while reducing energy consumption. We contribute to the decarbonization of the manufacturing industry and society by providing the expertise gained through our efforts within our company and to the rest of the world.
Our medium-term management plan through 2024 includes a companywide sales target (Green Revenue) of 130 billion yen in businesses that contribute to carbon neutrality. In fiscal 2022, the first year of the plan, we accelerated efforts to become carbon neutral and achieved 109.2 billion yen (105% of plan).
|Type of Risks and Opportunities
|Overview of Risks and Opportunities
|Business and Financial Impact
|Response to Risks and Opportunities
|Government Policy and Regulations
|Markets and Technology
|Products, Services, and Markets
|Industrial Automation Business
|Leverage innovative-Automation to provide solutions for needs to changing production methods, new capital investment, and improved energy productivity at production sites
|Social Systems, Solutions and Service Business
|The following trends accelerate the increasing energy management needs in response to decarbonization, and rising electricity prices
|Electronic and Mechanical Components Business
|Increased opportunities to provide Electronic and Mechanical Components Business components via the following:
Assumed period: Period covered by SF2030 (through fiscal 2030)
Short-term: less than 3 years; Medium-term: 3 to 10 years, Long-term; 10 to 30 years
Scenario analysis targets: Existing business
Definition of business and financial impact (large, medium, and small)
<Impact on risk: Positive or negative impact on operating income>
Physical Risk Adaptation Plan
We have established OMRON Carbon Zero, a target for reducing greenhouse gas emissions by 2050 based on the SBTs.
With regard to water risk as well, assuming 2030, we are identifying locations that are exposed to water risk at all of our global locations (including existing and new businesses) through WRI AQUEDUCT recognized by CDP Water as assessment criteria and water risk analysis services provided by risk management consulting firms.
The four sites with high levels of water risk include those in China (Dalian and Shanghai), Brazil (Jundiai), and Italy (Frosinone). Water intake in these areas in fiscal 2022 totaled 212 thousand m³, which counts for 20% of the total water intake of OMRON group. OMRON is voluntarily take initiatives to protect the water resources to be prepared to continue business without any guidance or order to cut the intake and to improve the quality of drainage by governments. We are also systematically implementing the following measures and more for sites with high levels of physical risks, such as water risk.
The OMRON Group conducts scenario analysis for each business to identify transition risks and physical risks due to climate change impacts. We then visualize the timing of emergence and degree of impact on business and finances for each scenario for the identified risks associated with climate change. Based on our assessments, we identified the risks associated with climate change that are important to our company, incorporating these results into companywide risk management as integrated business risk. Materialities related to the formulation of response measures are reported to the board of directors.
In fiscal 2022, we reevaluated the results of the fiscal 2021 scenario analysis for the Industrial Automation Business, Healthcare Business, and Devices & Module Solutions Business, re-performing scenario analysis for the Social Systems, Solutions and Service Business. We reviewed our risk assessment for physical risk at our main manufacturing centers in each business.
Given the importance of building a system to manage risks on an Enterprise-wide basis, the OMRON Group has been working on integrated risk management under a common group framework. We identify and assess climate change risk as an important risk for the group. We monitor efforts here by aligning risks with scenario analysis.
The OMRON Group has established indicators for Scope 1, 2, and 3*1 greenhouse gas emissions and for renewable energy as a percentage of electricity used in our business activities. We use these indicators to manage risks and business opportunities.
The OMRON Group views the creation of sustainable societies in terms of the environment as our commitment to improve lives and contribute to a better society under the OMRON Principles. In July 2018, we established OMRON Carbon Zero, aiming to eliminate Scope 1 and 2 greenhouse gas emissions by 2050.
In March 2022, OMRON evolved efforts to achieve carbon-neutral societies, changing our reduction scenario for Scope 1 and 2 from a 2°C scenario to a more aggressive 1.5°C scenario. We set a new target under Scope 3 Category 11 of an 18% reduction by fiscal 2030 (compared to fiscal 2016). These targets have been approved by the SBT Initiative*2.
OMRON will continue to improve energy efficiency toward achieving these targets. By utilizing J-Credits*3 derived from renewable energy and self-consignment*4 provided by our own Energy Solutions Business, OMRON aims to achieve carbon zero*5 for Scope 2 emissions across all domestic facilities by fiscal 2024.
|Scope 1 and 2*6