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Environment

TCFD Disclosures

Response to Climate Change

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.

Disclosure in Line with the Four Thematic Areas Recommended by the TCFD

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.

Governance

(1) Climate Change-Related Governance

Role of the board of directors and oversight structure

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, 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) as part of medium- and long-term performance-linked compensation (stock-based compensation) for internal directors and executive officers covering fiscal 2021 through 2024.

Strategy

(2) Strategy on Climate Change

Short-term, medium-term, and long-term climate-related risks, opportunities, and responses

Under SF2030 and our medium-term management plan, we identified carbon neutrality and reducing our environmental impact as sustainability-related material Issues, 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 carbon neutrality, (2) Evolved business models that combine products and services, (3) Co-creation with our partners, (4) Improved energy efficiency, 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°C or more; and average global temperatures rise to 2°C or lower as provided in the Paris Agreement (portions to 1.5°C or less)) published by the Intergovernmental Panel on Climate Change (IPCC) and International Energy Agency (IEA). 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. We reflect the results of the scenario analysis in the strategies of SF2030 and our medium-term management plan, with specific plans for responses.

Assumed period: Period covered by SF2030 (through fiscal 2030)

Adopted Scenarios:

  • 4°C Scenario : IPCC/RCP8.5, IEA/STEPS
  • 1.5/2°C scenario: IPCC/RCP2.6, IEA/SDS (portions of IEA/NZE)

Time Horizon:
Short-term: less than 3 years; Medium-term: 3 to 10 years, Long-term; 10 to 30 years

Scenario analysis targets: Existing business

Type of Risks and Opportunities Time Horizon Overview of Risks and Opportunities Response to Risks and Opportunities
Risks Transition Government Policy and Regulations Medium Term
  • Increase in business costs for compliance with climate change regulations (introduction of carbon tax, emissions trading, circular economy regulations, etc.)
  • Planned energy conservation and use of renewable energy (adopted high-efficiency air-conditioning equipment, expanded renewable energy in-house power generation, purchased J-Credits from social system projects), etc.
Markets and Technology Short/Medium Term
  • Increased competition in areas related to decarbonization (improved environmental performance of products, reduced carbon footprint, etc.).
  • Developing products and services to solve environmental issues (reduced greenhouse gas emissions and compliance with circular economy regulations, etc.)
Reputation Short/Medium Term
  • Change in reputation among investors due to inability to meet customer needs
  • Change in reputation among investors due to poor performance caused by inability to anticipate needs for solutions to environmental issues
  • Responding aggressively to climate change/circular economy to attract ESG investment, adding value to products, etc.
Physical Acute Short Term
  • Suspension of operations at locations or partner factory production facilities due to severe natural disasters (floods, torrential rain, water shortages, etc.), suspension of parts and materials procurement
  • Build resilience through business continuity plans (BCP) for our own locations
  • Continuing to expand procurement sources for semiconductors and other components, engaging in design changes to shift to components with less procurement risk; formulate supply chain strategies to increase resilience from a medium- to long-term perspective
Opportunities Products, Services, and Markets Industrial Automation Business Short/Medium Term
  • Increased opportunities to provide factory automation equipment in the domains below:
    By business domain
    • Digital devices: Increased demand for semiconductors to support the spread of environmentally friendly vehicles and EVs
    • Environmental mobility: Increased demand for EV-related components such as rechargeable batteries and EV vehicles
    • Foods and daily necessities: Increased demand for environmentally friendly packaging materials (plastic-free packaging, etc.) to achieve decarbonized societies
    • Expanding needs for decarbonized production processes
Leverage innovative-Automation to provide solutions for needs to changing production methods, new capital investment, and improved energy productivity at production sites
Healthcare Business Short/Medium Term
  • Increased needs for environmental performance due to the growth of ethical consumption
  • Capturing consumption demand via enhanced environmental performance (carbon reduction, circular economy, etc.)
Social Systems, Solutions and Service Business Short Term
  • Rapid decarbonization of energy supply/consumption, expansion of renewable energy/energy storage/energy management markets, and acceleration of the following factors:
    1. Companies and municipalities: Increased needs for decarbonization and disaster prevention, accelerating the introduction of distributed power sources from renewable energy and energy storage
    2. Households: Increased adoption of self-generation, storage, and use of electricity
  • Increasingly sophisticated energy management to solve electricity supply-demand balance issues associated with the adoption of renewable energy
  • Established energy management business based on solar power/energy storage
  • Expanding sales of power conditioners and storage batteries to meet the growing demand for renewable energy and energy storage in companies, households, municipalities, etc.
Electronic and Mechanical Components Business Short/Medium Term Increased opportunities to provide Electronic and Mechanical Components Business components via the following:
Shared/Common
  • Increased interest in improving the environmental performance of products and reducing carbon footprints
By domain
  • Home appliances: Higher demand for air conditioners with inverters in response to increased demand for air conditioners due to rising average temperatures, needs for strengthening measures to reduce greenhouse gas emissions from air conditioning equipment
  • Power tools: Advancing shift to electric tools in response to stronger greenhouse gas emissions reduction measures related to product usage Associated increased for DC current interruption
  • Factory Automation: Increased demand for new products (EVs, next-generation power semiconductors, recycled plastics, alternative foods, etc.) and decarbonization of production processes leading lead to increased demand for new and replacement factory automation equipment
  • Accelerated development and sales of electronic components that contribute energy savings in customer products and carbon footprint reduction in the manufacturing process (including customer manufacturing processes)
  • Leverage demand and design changes for decarbonization as opportunities by capturing market trends in a timely manner

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 five sites with high levels of water risk include those in China (Dalian and Shanghai), Japan (Okayama), US (San Ramon in California) and Indonesia (Bekasi). Water intake in these areas in fiscal 2021 totaled 280 thousand m³, which counts for 23% 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.

  1. Installation of generators
  2. Subscription to logistic and property insurance
  3. Ad-hoc review of disaster prevention manuals
  4. Minimizing impact on product manufacturing (review of manufacturing processes)

Risk Management

(3) Risk Management Related to Climate Change

Process to evaluate, identify, and manage risks related to climate change

The OMRON Group conducted scenario analysis for each business during the current fiscal year to identify transition risks and physical risks due to climate change impacts. We then visualized 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, and we developed response measures to said risks. Material Issues related to the identification of risks and the formulation of response measures are reported to the board of directors.

In fiscal 2022 and beyond, we will continue to analyze scenarios regularly, update risks and response measures, and monitor the progress of response measures.

Integration into Enterprise-wide risk management

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.

Indicators and Targets

(4) Climate Change Indicators and Targets

Indicators related to climate change risks and opportunities

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.

Greenhouse Gas Emissions Targets and Results (Scope 1, 2, and 3)

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.

(Unit: kt-CO2)

  FY2016 Results
(Standard Year)
FY2021
Results
FY2024
Targets
FY2030
Targets
FY2050
Targets
Emissions Emissions Vs. FY2016 Vs. FY2016 Vs. FY2016
Scope 1 and 2*6 250 123 -50% -53% -65% Zero
Scope 3
Category 11
9,102 10,401 +14% -18%
  • *1Scope 1 and 2: Greenhouse gases emitted directly or indirectly from the company's own operations.
    Scope3 Category 11: Scope 3 emissions are greenhouse gas emissions from the company’s own supply chain. Of these emissions, Category 11 is associated with the use of products and services manufactured or sold.
  • *2Science Based Targets Initiative (SBTi): An international initiative that encourages medium- and long- term greenhouse gas reduction targets based on scientific evidence
  • *3J-Credits: A system in which the government certifies environmental value (i.e., the effect of avoiding CO2 emissions).
  • *4Self-consignment: A power supply system that allows businesses that have own their own power generation facilities to transmit and supply and use power generated by those facilities to their factories and offices in remote areas via the power grids of general transmission and distribution companies.
  • *5The system covers greenhouse gas (Scope 2) emissions from the use of electricity by the company at 13 production sites and 63 non-production sites (headquarters, R&D, and sales).
  • *6Greenhouse gas emissions (Scope 1 and 2) for fiscal 2021 will be disclosed on the OMRON corporate website. These results will be subject to a limited level of assurance by the third-party assurance firm Bureau Veritas Japan. These limited assurance engagements are in accordance with the International Standards on Assurance Engagements (ISAE) 3000, Assurance Engagements Other Than Audits or Reviews of Historical Financial Information of the International Auditing and Assurance Standards Board (IAASB).
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