-MATERIAL ISSUE 3- RESPOND TO THE CLIMATE CRISIS
KOKUYO Materiality Respond to the climate crisis
Over 90% of our emissions are from our value chain (scope 3), meaning that we can’t contribute to carbon neutrality just by reducing emissions from our own businesses.
We rely on numerous production and distribution partners. To contribute to carbon neutrality, we work with these supply chain partners on initiatives such as switching to more sustainable raw materials and delivery methods.
|2030 challenge goals
|2024 commitment goal
|Our collaboration with partners contributes toward carbon neutrality throughout our supply chains.
|With our partners support, we have achieved our carbon emissions reductions targets based on the Science Based Targets initiative (SBTi).
|SBTi-based emissions reduction target: Target set and achieved (target to be determined)
|Emissions reductions target: 50% reduction in our Japanese businesses from 2013 level
|Carbon sequestration: At least 6,000 t-CO2 sequestered a year
Examining ways to achieve the 2024 reduction target
In a first step toward decarbonizing our supply chains, we have started exploring ways to reduce CO2 emissions from our own facilities and resources. Much of our scope 1 and 2 emissions are attributable to electricity. We have therefore launched a cross-organizational taskforce to examine ways of reducing electricity-related CO2 emissions. The taskforce includes facility managers for production sites with high CO2 emissions, administrative staff in charge of managing electricity and facilities, and the planning staff for business units.
Noting that KOKUYO will need to cut emissions dramatically and quickly in order to achieve the 2024 target, the taskforce decided on a policy of buying net-CO2-free electricity from power companies.
In 2022, KOKUYO Mie Plant switched to net-CO2-free electricity, and other KOKUYO facilities in Japan are set to do so too. By transitioning to net-CO2-free electricity in Japan, we will meet our 2024 commitment goal of 50% reduction in CO2 from the 2013 level.
KOKUYO Mie Plant switches to net-CO2-free electricity
In November 2022, KOKUYO Mie Plant switched to net-CO2-free electricity in a first step toward meeting the 2024 target of 50% reduction in CO2. KOKUYO Mie Plant is a core production site in our furniture business.
Because it now purchases net-CO2-free electricity, KOKUYO Mie Plant boasts a zero as its coefficient for electricity-related CO2 emissions in its production of office furniture.
KOKUYO Mie Plant has engaged in environmental activities since it first entered service in 1993. In FY2022, the plant’s greening efforts were honored in the 2022 National Award for Greenery Factory (the plant earned the Chairperson's Award of the Japan Greenery Research and Development Center). The plant’s greening efforts include creating more green space, considering flower and tree species, flowering time, and leaf and petal colors. They also include reducing CO2 emissions, recycling, and contributing to the local community.
Scope 1 emissions (emissions from owned or controlled sources) and scope 2 emissions (emissions from the generation of purchased electricity or heating)
CO2 emissions from 31 KOKUYO Group companies (including overseas companies)
Total emissions for all 31 organizations in the corporate group (which includes Iwami Paper Industry since 2018)*1 amounted to 38,792 tons,*2 an increase of 2,542 tons from the 2021 level. Around 763 tons of the increase was attributable to a change in emissions factor data among energy providers. The remaining 1,779 tons was attributable to an upswing in the Indian stationery business, reflecting a recovery in demand for stationery following the reopening of schools.
View ESG data (responding to the climate crisis) As to CO2 emission coefficients for electricity in Japan, we adopt the coefficients based on the Act on Promotion of Global Warming Countermeasures (base emission coefficients for each electricity company based on actual performance for FY2020 and FY2021). As to CO2 emission coefficients for overseas electricity, we adopt the country-specific factors cited in Emissions Factors 2022 published by the International Energy Agency (IEA). The difference due to change in coefficients is the difference with the emissions calculated based on the average of all electricity sources for 2000 (0.378 kg-CO2/kWh).
We adopted the ASBJ Accounting Standard for Revenue Recognition (No. 29, March 31, 2020) at the start of 2022. With this standard retroactively applied, the result for 2021 would be 252.7 GJ / 100 million yen.
CO2 emissions from sources in Japan
In 2022, a total of 24,101 tons of CO2 was emitted by 11 consolidated subsidiaries in Japan*1 and by our disability-friendly subsidiaries, KOKUYO K Heart and Heartland. This is 2 tons less than the previous year’s figure (0.0% year-on-year change). The factors behind this change include a decrease of 21 tons attributable to a change in emission coefficients.*2 If the change in emission coefficients is discounted, the emissions actually increased by 19 tons. According to our estimates, the factors behind this 19 ton-increase were as follows: Consolidating manufacturing operations increased emissions by 487 tons, more than offsetting a decrease of 405 tons from operational improvements and a decrease of 63 tons from improvements in facilities and equipment. Disclosed below are the results by sector (offices, plants, distribution).
The companies are as follows: KOKUYO, KOKUYO Product Shiga, KOKUYO MVP, KOKUYO Logitem, KOKUYO Supply Logistics, KOKUYO Marketing, Kaunet, Actus, KOKUYO Finance, KOKUYO & Partners, LmD International. As to CO2 emission coefficients for electricity, we adopt the coefficients based on Japan’s Act on Promotion of Global Warming Countermeasures (base emission coefficients for each electricity company based on actual performance for FY2020 and FY2021).
Efforts among offices in Japan
Efforts among plants
Plants emitted 26 more tons than they did last year (4 more tons if we discount the impact of the emission coefficient). Emissions increased by 302 tons because of higher production and insourcing. However, this increase was offset by a reduction of 256 tons caused by quicker assembly line changes and stricter enforcement of machinery operation rules, and a reduction of 42 tons caused by more efficient compressor-room ventilation and adoption of more energy-efficient technology (LED lighting).
We have discounted Mie Plant’s shift to net-zero energy.
Efforts in distribution operations in Japan (storage, shipment)
Distribution operations emitted 51 less tons than they did last year (5 less tons if we discount the impact of the emission coefficient). Emissions increased by 90 tons because of a higher transaction volume and consolidations of distribution centers. However, this increase was more than offset by a reduction of 95 tons caused by the adoption of more energy-efficient practices and adjustments of lighting levels in distribution centers.
Expand our scope 3 emissions coverage
We are working to comply with the increasing societal demand for companies to manage and report their scope 3 emissions, which are emissions from sources that the company indirectly affects in its value chain (such as emissions from manufacturing services, transport and distribution, or from the use and end-of-life treatment of sold products).
In 2022, we expanded the range of our scope 3 reporting with a view to making our value chain carbon free. To ascertain the impacts of our business activities across our value chain, we started quantifying the impacts of all activities across our corporate group, instead just those related to KOKUYO brands as before.
With this wider scope, total GHG emissions in 2022 amounted to 1,245,425 tons, 2.5 times the 2021 result. Scope 3 emissions accounted for 97% of this total, and 80.6% of the scope 3 emissions were in category 1 (purchased goods and services).
We will continue our efforts to reduce our value chain emissions.
The reliability of our environmental data was confirmed in an independent assessment conducted by Bureau Veritas Japan.
Entities assessed for scope 3: 31 companies in KOKUYO Group (KOKUYO, 20 consolidated subsidiaries, 10 associated companies)
Endorsement of TCFD, TCFD-compliant disclosure
In 2022, we endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). We regard climate change as a major strategic concern and have established an organizational framework for managing climate-related risks. Under the supervision of the Board of Directors, the Sustainability Committee identifies climate-related risks so that the management can incorporate the information into strategic planning and take the decisions and actions necessary to mitigate the risks. To supervise this process effectively, the Board of Directors hears reports from the committee twice a year and then deliberates on climate-related risks and other sustainability issues. The board also decides on matters of strategic importance.
The Sustainability Committee’s membership consists entirely of executives and the committee is chaired by the Managing Officer of the CSV Division. The committee monitors social and environmental trends to identify strategic concerns related to sustainability. It then formulates actions plans and allocates budgetary resources for addressing these concerns. The Environment Subcommittee (a subcommittee of the Sustainability Committee) collaborates with the managers responsible for each business division to identify climate-related risks, incorporate the findings into strategic planning, and spearhead organization-wide efforts to mitigate the risks.
We use scenario analysis to identify the climate-related risks and opportunities and their financial implications so that the necessary measures can be taken. Since 2030 is the endpoint for our long-term vision, our scenario analysis projects climate-related shifts in society and among stakeholders between now and that endpoint.
The scenario analysis conducted in FY2021 covered the furniture and business supply distribution businesses, which fall under the Workstyle segment. In FY2022, it covered the stationery and interior retail businesses, which fall under the Lifestyle segment. We have identified the climate-related risks and opportunities in the stationery and interior retail businesses and will now analyze the financial impacts of these risks and opportunities.
|Description of scenario
|Within 1.5 ℃
|Sustainable Development / Net-zero Scenarios: Committing to a net-zero transition by 2050, the world acts to keep global warming below 1.5 ℃ relative to pre-industrial times. Government regulation is tougher compared to that in the 4 ℃ scenario, and people take a greater interest than they do at present in climate change and other environmental issues.
|Stated Policies Scenario: Government regulation is weak compared to the other two scenarios. There are no further measures or further policy intentions beyond what governments have already implemented or stated. GHG emissions may increase for a time, and people’s interest in climate change and the environment remain as it is now.
Risks and opportunities
< Workstyle Field >
|With growing pressure around the world for a net-zero transition, our customers, suppliers, and other social stakeholders will take more action to contribute to the net-zero transition and to reduce waste. The financial/business risks include higher CO2 emissions costs, the need for more capital spending, higher raw material costs, and a decline in sales revenue following changes in customers’ needs. The opportunities include the potential for developing goods and services to cover shifting customer needs and behavior, and the potential to expand business domains by developing low-emissions businesses. Accordingly, we will seize the opportunity to develop new products and services so that we can create value suited to the changes among customers and in society.
|Timber prices rise amid the global spread in consumer activism coupled with climate impacts. Manufacturing and transportation become increasingly vulnerable to climate-related disaster risks. The financial/business risks include higher raw materials costs and the risk that hiking sales prices to absorb the cost increases may cause a drop in demand for furniture products. Where physical risks materialize, the risks include opportunity losses, business suspension, and the cost of responding to the incident. We will address the risks by increasing our organization’s resilience. We also eye opportunities in the changing market trends, including the rise of disaster management efforts and new workstyles in our customers’ offices. To capture these opportunities, we will develop new solutions that create value.
|Business Supply Distribution
|As the net-zero transition progresses, customers, distributors, and other social stakeholders take more action to contribute to the net-zero transition and to reduce waste. The financial/ business risks include the costs of carbon taxes, higher transport costs, and a decline in sales revenue following changes in customers’ needs. The opportunities include the potential to increase sales revenue with a lineup suited to the shifting customer needs. Accordingly, we will seize the opportunity to change our product lineup and expand our digital measures so that we can increase our climate resilience and create value suited to the changes among customers and in society.
|Raw material prices rise amid the global spread in consumer activism coupled with climate impacts. Physical risks materialize, disrupting transportation and other parts of the supply chain, which may have severe ramifications for the business model. The financial/business risks include higher costs, both for raw materials and for transportation. Where physical risks materialize, the risks include opportunity losses, business suspension, and the cost of responding to the incident. To address the risks, we will strengthen our organization’s resilience by altering our procurement strategy and expanding digital measures.
< Lifestyle Field >
|The global net-zero transition leads to new consumer and market trends, with consumers changing their attitudes toward stationery and other consumables and with new workstyles and learning styles emerging. The financial/business risks include higher CO2 emissions costs, higher raw material costs, the costs of added investment, and the risk that the stationery market shrinks amid digitalization. The financial/business opportunities include the chance to create new value by developing products and services for Japanese and overseas markets that cater to the emerging trends.
|Cost pressures increase amid the global spread in consumer activism and the physical impacts of climate change become an increasing threat. The financial/business risks include higher costs in raw materials and energy. Where physical risks materialize, the risks include opportunity losses and the cost of responding to the incident. Financial/business opportunities include a growing demand for stationery in overseas markets. The opportunities can be realized by strengthening resilience, globalizing the supply chain, and expanding in overseas markets.
|Interior retail businesses
|The net-zero transition increases pressure to realize ecological sustainability, including reducing the CO2 emissions generated in the life cycle of furniture (from production to disposal). The financial/business risks include higher CO2 emissions costs, higher raw material costs, and the costs of added investment. They also include the risk that people purchase interior goods less frequently out of concern for the environment and the risk of increased competition from furniture rental and subscription services. Financial/business opportunities can be realized by balancing business interests with environmental friendliness, such as by carbon footprint labeling and developing services that reduce furniture waste (e.g. repair services).
|Prices for timber goods and other products rise amid the global spread in consumer activism coupled with climate impacts. The supply chain and retail activities become increasingly vulnerable to climate-related disaster risk. The financial/business risks include higher raw materials costs and the risk that hiking sales prices to absorb the cost increases may cause a drop in demand for furniture products. Where physical risks materialize, the risks include opportunity losses and the cost of responding to the incident. To manage these risks, we will strengthen resilience and ensure stable deliveries of our products by altering our procurement strategy and developing our e-commerce business.
Climate-related risks are managed by the Environment Subcommittee (a subcommittee of the Sustainability Committee). Guided by the findings of regular internal and third-party research, this subcommittee identifies and evaluates the risks with attendance of managers responsible for each business division. Once the risks are identified and evaluated, they are communicated to business divisions concerned. The strategic implications of the risks are incorporated into strategic planning by the Environment Subcommittee, while business-specific implications are addressed by the relevant business divisions.
Under the existing system for groupwide risk management, the Risk Management Committee has steered efforts across the corporate group to manage groupwide risks. To integrate climate-related risk management into this existing system for groupwide risk management, the Risk Management Committee will now coordinate with the Sustainability Committee’s Environment Subcommittee.
Specifically, the Environment Subcommittee will inform the Risk Management Committee about important matters concerning risk management and about the state of compliance with environmental regulations.
Metrics and Targets
We will step up efforts to reduce CO2 emissions to mitigate climate change and contribute to a net-zero transition. We have defined the following metric and target for 2024.
|50% reduction from 2013 level in scopes 1 and 2: consolidated subsidiaries in Japan,* KOKUYO K Heart Co., Ltd., and Heartland Co., Ltd.
|21.4% down from 2013 level (24,101 t-CO2)*
These subsidiaries consist of the following: KOKUYO, KOKUYO Product Shiga, KOKUYO MVP, KOKUYO Logitem, KOKUYO Supply Logistics, KOKUYO Marketing, Kaunet, Actus, KOKUYO Finance, KOKUYO & Partners, LmD International
Alongside efforts to reduce CO2 emissions, we support forest carbon sequestration by a forest-thinning program. In FY2021, we thinned 88.55 hectares of forest, contributing to the absorption of 4,698 tons of CO2.