We believe that assessing climate-related risks and opportunities in our business activities and proactively disclosing and enhancing information in line with the framework of “Governance, Strategy, Risk management, and Indicators and targets” recommended by the TCFD to companies is important for the sustainable growth of companies and is an important part of our responsibility to help realize a decarbonized society.
What is TCFD ?
With the growing risk of climate change due to global warming, there is a broad trend to assess the financial impact of climate change on a company's business. The TCFD (Task Force on Climate-related Financial Disclosures) is an international initiative established by the Financial Stability Board (FSB) in 2015 to encourage companies to disclose information on the financial implications of the risks and opportunities that climate change presents to their businesses.
|Recommended disclosure content
|Disclose the organization's governance around climate-related risks and opportunities.
|a) Describe the board's oversight of climate-related risks and opportunities.
|b) Describe management's role in assessing and managing climate-related risks and opportunities.
|Role of management
|Disclose the actual and potential impacts of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning where such information is material.
|a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.
|Climate change-related risks and opportunities
|b) Describe the impact of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning.
|Impact on business strategies and financial plannings
|c) Describe the resilience of the organization's strategy, taking into consideration different climate-related scenarios, including a 2℃ or lower scenario.
|Resilience of strategy
|Disclose how the organization identifies, assesses, and manages climate-related risks.
|a) Describe the organization's processes for identifying and assessing climate-related risks.
|Process for identifying and assessing climate change risks
|b) Describe the organization's processes for managing climate-related risks.
|Climate change risk management process
|c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization's overall risk management.
|Integration into the company-wide risk management process
|Indicators and targets
|Disclose the Indicators and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.
|a) Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process.
|Metrics used to assess risks and opportunities
|b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.
|Greenhouse gas emissions
|c) Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.
|Targets and performance
Supervisory structure by the Board of Directors
We regard the contribution to the creation of a sustainable society as an important management issue, and have identified materialities to be addressed, one of which is “Contribution to climate change policy/measures through technology and business”
The ESG Committee was established in March 2020 as an advisory body to the Board of Directors to promote measures related to this materiality. The President and Representative Director assumes the position of Chief ESG Officer and, under the supervision of the Board of Directors, is ultimately responsible for overall sustainability activities, including strategies related to climate change-related risks and opportunities.
Role of management
The ESG Committee, chaired by the President, meets four times a year to discuss important issues, including the Carbon Neutral 2030 Declaration, which calls for reducing greenhouse gas emissions from electricity and other sources used in business operations to zero by fiscal 2030. The rate of introduction of renewable energy and other measures to achieve carbon neutrality are partially linked to executive compensation. In addition, an Environment Committee has been established under the oversight of the Executive Officer in Charge of ESG as an organization to manage climate-related risks, promote internal initiatives, and carry out business operations.
The Environment Committee is chaired by the General Manager of the CSR Division and consists of environmental managers from each of our business units and major Group companies, and promotes specific measures to achieve carbon neutrality 2030.
Climate change-related risks and opportunities
In order to consider strategies for adapting to future events related to climate change, we conducted two scenario analyses: the rapid achievement of a decarbonized society in the 1.5℃ scenario, and the progression of global warming due to insufficient climate change measures in the 4℃ scenario. We identified the financial impacts that are expected to occur by 2050, particularly those affecting businesses along the value chain, including upstream and downstream, and identified the risks involved.
We are a major service provider in the domestic telecommunications business, and in the FY 2022, we used 2,278,902 MWh (consolidated sales ratio of 99%) of electricity to operate network facilities, including approximately 300,000 base stations nationwide. The number of base stations and amount of electricity is expected to increase due to the increase in traffic associated with the spread of 5G. In addition, 68% of Japan's land area is forested, and the country is mountainous with a steep mountain range running through the center of its long, north-south axis, making rivers short and swift, and the ground is often fragile. During the late rainy season and typhoon season, there is a risk of landslides, flood damage and resulting power outages due to localized heavy rain, mainly on the Pacific side of western Japan. Furthermore, in winter, it is necessary to consider power outage countermeasures and facility damage risk reduction against heavy snowfall on the Sea of Japan side from Hokuriku to Tohoku and Hokkaido.
Mobile phones serve as an important lifeline for safety confirmation and information gathering, and we are working to build a disaster-resistant communication network. However, the risk of increased damage to base stations is increasing due to the rise in the amount of water vapor and changes in weather patterns resulting from global warming and the increased occurrence and severity of disasters.
Based on the above, the scenario analysis identified that while reputational and technological risks are limited in the 1.5℃ scenario, there are potential regulatory risks such as carbon taxes associated with increased electricity use.
In the 4℃ scenario, while the risks from sea level rise and temperature rise are limited, the risk of damage to base stations increasing in frequency due to power outages, transmission line interference due to heavy rainfall disasters is assumed. In terms, as a risk countermeasure and opportunity, we have decided on Carbon Neutral 2030, in which all electricity and other energy used in our business activities will be renewable energy by 2030, and have set a plan to promote renewable energy for base station electricity and to promote the provision of electricity from real renewable energy sources as KPIs for materiality. As an interim goal of the Carbon Neutral 2030 declaration, the plan is to complete the conversion of at least 70% of base station electricity to effectively renewable energy by FY2022, and to move toward achieving carbon neutrality in FY2030.
Impact on business strategies and financial plannings
We analyzed the impact of climate change risks on our business strategies and financial plannings. In the 1.5℃ scenario, we assumed that there would be no acute or chronic physical risks from climate change at a level that would affect our business, but that policies and laws and regulations (Tax for Climate Change Mitigation, Act on Promotion of Global Warming Countermeasures, etc.) to combat climate change would be strengthened, and we estimated the impact of a carbon tax of about 16,000 yen per ton of CO2 equivalent starting in 2025.
Furthermore, we will closely monitor the future trends of carbon pricing as a domestic regulatory measure.
In the 4℃ scenario, we assumed that there would be no materialization of strengthened policies, laws, regulations, including climate change countermeasures, and the transition risk in technology, market, and reputation. However, we considered that the physical impacts of climate change, such as more severe extreme weather events, would occur. Based on the restoration cost of 770 million yen in FY2019, which was the most severe damage to our company due to heavy rainfall with emergency warning in recent years, we have estimated the potential financial impact that is expected to occur in the future.
Taking into account the specific circumstances of each region as part of the adaptation measures to manage physical risks, we implemented reinforcement measures with a budget of 1.85 billion yen in the fiscal year 2022. For the fiscal year 2023, we are primarily planning the following measures
- To address the increasing occurrence of typhoons and linear rainbands, which have led to a rising probability of flood damage, we are implementing elevation measures in some of the base stations located in coastal and river areas.
- In order to maintain more stable service during large-scale power outages, we are implementing power reinforcement measures through additional deployment of power generators, long-lasting batteries, and other backup power sources.
- Implementing regular inspections to reduce the risk of equipment damage during disasters.
Resilience of strategy
To reduce the risk of damage from weather disasters, we have continued to invest in the installation of long-lasting batteries in base stations, deployment of disaster drones, and enhancement of disaster countermeasure inspections, and no incidents leading to serious area disruptions occurred in FY2022.
In addition, we are promoting efforts to commercialize the High Altitude Platform Station (HAPS) service, a stratospheric communications system that provides a communications network from the stratosphere, approximately 20 kilometers above the ground. HAPS will enable the construction of a stable Internet connection environment in places and regions where communication networks are not in place, such as mountainous areas, remote islands, and developing countries. In FY2021, we issued our first sustainability bond (HAPS bond) for capital investment, research and development, and business operations of HAPS.
See the table below for risks and opportunities identified and measures taken to address them.
Identified risks and opportunities
Risk type : Transition Risk
measures / Opportunities
|Policy and legal
|Increased tax burden due to introduction of carbon tax
|Impact on business promotion due to delay in introduction of energy-saving
|Impact on sales due to delays in providing decarbonization services
|Damage to brand image and impact on stock price if deemed insufficient for decarbonization efforts
Risk type : Physical risk
measures / Opportunities
|Increased restorationcosts due to increasedbase station damage
|Increased air conditioning costs due to rising temperatures
- *1Financial risk: Impact is described in three levels (large, medium, and small).
- *2Time horizon: short-term (-2023), medium-term (-2025), long-term (2026-)
Process for identifying and assessing climate change risks
Climate change-related risks are selected and reviewed at least once a year by the Environment Committee, which is chaired by the General Manager of the CSR Division and consists of environment committee members from each of our business units and major Group companies, under the oversight of the Executive Officer in Charge of ESG. The identified risks are analyzed by a dedicated environmental team in the CSR Promotion Department of the CSR Division, taking into consideration various external factors, and evaluated by the Executive Officer in Charge of ESG.
As a result of the implementation of scenario analysis in FY2022, it was confirmed that there are no significant risks related to changes in strategy.
Climate change risk management process
The identified risks, including regulatory, reputational, market, technological, and physical risks, are monitored and progress managed by the Environment Committee, which confirms the formulation and implementation of countermeasures.
Integration into the company-wide risk management process
In order to identify and prevent the manifestation of company-wide risks, we have established a management system that analyzes risks from various angles within the company. The Risk Management Office periodically identifies company-wide and comprehensive risks and checks the status of countermeasures, and reports the results to the Risk Management Committee, whose members include the president, vice presidents, and CFO, as well as corporate auditors and the heads of related divisions. The Risk Management Committee determines the level of importance of risks and the person responsible for dealing with them (risk owner), issues instructions on countermeasures, and reports the status to the Board of Directors. The Internal Audit Office confirms these overall risk management systems and conditions from an independent standpoint.
Climate change risks managed by the Environment Committee are integrated with company-wide risk management, and through regular risk management cycles, we are working to reduce and prevent risks.
Indicators and targets
Metrics used to assess risks and opportunities
To manage the risks and opportunities posed by climate change to our company, we are actively managing environmental impact data, including greenhouse gas emissions (Scope 1 - direct emissions of greenhouse gasses, Scope 2 - indirect emissions from electricity, heat, and steam supplied by other companies, and Scope 3 - emissions from other companies associated with our business activities).
Greenhouse gas emissions
Greenhouse gas emissions (Scope 1 and 2) for FY2022 were 579,919 t-co2 and 9,368,649 t-co2 for Scope 3. For detailed figures, please refer to the data book at the end of this report, which is basically 99% of the Group's consolidated sales ratio for FY2022. Any differences will be noted in the table.
Targets and performance
As part of our Scope 1 and 2 goals, we have set a carbon neutral goal to reduce greenhouse gas emissions from electricity used in our business activities to zero by 2030. In the fiscal year 2020, we achieved a 30% transition to renewable energy for base station electricity, and in the fiscal year 2021, we reached 50% transition to renewable energy. We plan to progressively achieve a transition of 70% to renewable energy by the fiscal year 2022 and set a target of 80% for the fiscal year 2023. Additionally, we will promote greenhouse gas reduction for electricity usage in all of our facilities and equipment, not just base stations.
Furthermore, we will enter into long-term contracts for renewable energy procurement and aim to switch 50% of the electricity we use to additional renewable energy sources by the fiscal year 2030, with the ultimate goal of achieving a 100% transition by 2050.
In June 2023, our company announced its commitment to achieve “net-zero” greenhouse gas emissions (including supply chain emissions) by the fiscal year 2050, encompassing Scope 1, 2, and 3 emissions associated with business activities.
In order to establish a roadmap for reducing emissions across the entire supply chain, we participated in the Ministry of the Environment's “FY2022 Model Project for Promoting Decarbonization of the Entire Supply Chain of Large Corporations”. We have been deploying guidelines to our business partners regarding emissions reduction and requesting the establishment of emission reduction targets in line with the Paris Agreement, as well as the disclosure of progress updates.
Other ongoing initiatives include the following plans.
- Power efficiency and energy-saving measures utilizing technologies such as Artificial Intelligence (AI) and the Internet of Things (IoT)
- Reduction of environmental load through the development of next-generation batteries
- Improvement of energy consumption efficiency through the establishment of a highly decentralized computing infrastructure (xIPF)
- Construction of decentralized AI data centers utilizing green energy sources
- Reduction of greenhouse gas emissions associated with human mobility through the promotion of telework
Our greenhouse gas emission reduction targets, including Scope 3, have been certified by the international climate change initiative SBTi (Science Based Targets initiative) as scientifically based “SBT (Science Based Targets)”.
For more information on SBT targets, please click here
The Scope 3 reduction target validated as SBT is a 14.8% reduction by FY2030 compared to the base year (compared to FY 2019).
In June 2023, we also commit to SBT NetZero and promote efforts to obtain certification.
Cautionary Statement Regarding Forward-Looking Statements Plans, forecasts, strategies, and other statements in this report contain forward-looking statements that are based on our judgment in light of the information available to us at the time of preparation. Please be aware that such matters could differ materially from those discussed in the forward-looking statements. Risks and uncertainties that may affect our operating results include, but are not limited to, the natural environment in which we operate, economic conditions, market competition, exchange rates, taxes, or other systems.