OMRON recognizes that climate change impacts our future sustainable growth. We are engaged in the following framework, using the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD*1), for which we declared our support in February 2019.
OMRON has designated response to climate change as one of is key sustainability issues under its medium-term management plan. We are carrying out specific initiatives in accordance with annual targets and plans approved by the Sustainability Committee and the Executive Council. These initiatives are monitored and supervised by the Board of Directors, based on reports on their content and progress. Part of the medium-to-long-term, performance-linked compensation for internal directors and executive officers incorporates evaluations based on sustainability indicators evaluated by third parties.
In its next Long-term Vision to 2030, OMRON established the social issues on which it should focus, of the many diverse ones that are emerging, as reducing greenhouse gas emissions, human-machine collaboration and harmonization, and contributing to extending healthy longevity.
With this, we will create value by capturing four growth opportunities among these social issues that OMRON will help to resolve. These four growth opportunities are: the rising sophistication of manufacturing, automation of primary and tertiary industries, energy solutions to achieve carbon neutrality, and preventative medical support. We believe that not only these energy solutions to achieve carbon neutrality, but also the rising sophistication of manufacturing and automation of primary and tertiary industries will lead to the realization of a decarbonized society. OMRON will use its businesses to contribute to the realization of a decarbonized society, resolve social issues, and improve the value of its businesses.
In 2020, amid these circumstances, we carried out scenario analysis for our Social Systems, Solutions & Service Business (SSB). Here, we explored the important risks and opportunities in a scenario where decarbonization and the circular economy are accelerated, and particularly the measures to take toward achieving business opportunities. In SSB, we are utilizing scenario analysis results to expand business opportunities using decarbonization and the circular economy as a launchpad. One of our efforts to this end has been our launch of the POWER CONTINUE flat-rate rental service for power conditioners for low voltage field solar power generation, a joint project with Tokyo Century Corporation.
Our goal is to realize a circular economy through the collection and reuse of products, rather than conventional selling models. Going forward, we will continue to expand the number of product models that can be replaced, and provide renewable energy usable over the long-term through the POWER CONTINUE service, contributing to achieving carbon neutrality in 2050.
In fiscal 2021 in our Industrial Automation Business (IAB), Electronic & Mechanical Components Business (EMC), and Healthcare Business (HCB), we will also conduct scenario analyses based on multiple climate change scenarios. We will explore how to maximize business value using climate change as a launchpad given the materialities in our next Long-term Vision, and will use the results to consider our business strategy in our next medium-term plan. Using scenario analyses, we will take solid action against a highly-uncertain climate change, and practice resilient management in the face of climate change.
The risks and opportunities identified based on our scenario analyses are as follows.
Assumed period: Fiscal 2030
Scope: In addition to matters related to the Energy Solutions Business, some matters relevant company-wide. Matters related to the entire value chain, including upstream and downstream.
Physical Risk Adaptation Plan
We have established OMRON Carbon Zero, a target for reducing greenhouse gas emissions by 2050 based on the SBTs.
For water risk, at all global bases, we use the CDP Water-certified evaluation standard WRI Aqueduct, and water risk analysis services provided by risk management consulting firms, to ascertain which base are exposed to water risk.
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 fiscal 2019 totaled 249 thousand m3, which counts for 15% 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 bases with high levels of physical risks, such as water risk.
Under its integrated management structure, OMRON manages risks that have a significant impact on management and finances as key management risks. We also analyze climate change risks as part of our integrated risk management. We collect and analyze a wide range of information on risk factors such as regulations relating to climate change and their impact on business, by conducting audits of environmental legal compliance assessment globally, assessing vulnerability of each site to natural disasters (flooding, torrential rain, water shortages, etc.) which are expected to increase in scale and frequency as a result of climate change, and making preparations for business continuity.
OMRON has designated greenhouse gas emissions as an indicator for climate change, and has set OMRON Carbon Zero with the goal of reducing greenhouse gas emissions to zero by fiscal 2050. Using the Scope 1 and 2 greenhouse gas emissions quantities of fiscal 2016 as a baseline, we backcast from fiscal 2050 to set reduction targets for fiscal 2030 and fiscal 2020.*2 A target for Scope 3 is also under consideration. Under ORMON Carbon Zero, we are targeting a 32% reduction in greenhouse gas emissions by fiscal 2030, compared to fiscal 2016. This represents a reduction of approximately 300 thousand t-CO2 (reference value) by fiscal 2030 from the reductions expected if initiatives to reduce greenhouse gas emissions remained at the current level. If a carbon tax were to be introduced by 2030 in the countries where OMRON operates,*3 the financial impact of reducing greenhouse gas emissions is estimated to be between ¥0.99 billion and ¥3.3 billion.*4
In fiscal 2020, we reduced greenhouse gas emissions to 123 thousand t-CO2, a 50% reduction compared to fiscal 2016. This was achieved by continuing to procure renewable energy-derived electricity in Japan, which we started to do in fiscal 2018, in addition to promoting energy conservation measures at each site, and installing new PV inverter systems. OMRON will continue its efforts to reduce greenhouse gas emissions, aiming to reduce the emissions to zero by 2050.