3. Scenario Analysis - Practice Cases
by Sector

Chapter 3. Scenario Analysis - Practice Cases by sector
This chapter explains how scenario analysis is carried out based on
the support cases of the Ministry of the Environment (13 companies
supported in FY2020 and FY2021).
The numerical information in each case is based on the information at thetime of support.

Cases of scenario analysis by sector (FY2020, FY2021)

For beginning scenario analysis
For beginning scenario analysis
SectorFinancial

Preparation

Preparation

Preparation

Preparation

Gainingunderstandings frommanagements

Establishing anorganizational structure
for scenario analysis

Setting target analysis

Setting timeline foranalysis

3-12, 3-13

3-15

Fuji Oil Company, Ltd.

3-30

3-33

Kyushu Railway Company

3-42

3-46

Nishi-Nippon Railroad Co., Ltd.

3-54

3-57

GUNZE LIMITED

3-68

3-71

3-81, 3-86, 3-87

3-84

Nippon Paper Industries Co., Ltd.

3-93

3-97

Mitsui Mining & Smelting Co., Ltd.

3-108, 3-109,
3-110

3-112

3-125

3-129

Company

Asset
ORIX Asset Management Corporation
Management
EnergyTransportation

Shin-Etsu Chemical Co., Ltd.
Materials

NonFinancial

3-82

UACJ Corporation
Agriculture,
Food, andMaruha Nichiro Corporation
Forest Products

3-141Electronic
Equipment

YASKAWA Electric Corporation

3-154

3-157

Information
Technology

SCSK Corporation

3-168

3-172

Retailing

ASKUL Corporation

3-179, 3-180

3-181

3-1

Cases of scenario analysis by sector (FY2020, FY2021)

STEP2. Assess materiality of climate-related risks
STEP2. Assess materiality of climate-related risks
SectorFinancial

Stage 2

Stage 3

Listing risk items

Identifying potential impact
on business

Assessing materiality of
risks

3-14

3-14

3-14

3-32

3-32

3-32

Kyushu Railway Company

3-44, 3-45

3-44, 3-45

3-44, 3-45

Nishi-Nippon Railroad Co., Ltd.

3-55, 3-56

3-55, 3-56

3-55, 3-56

GUNZE LIMITED

3-69, 3-70

3-69, 3-70

3-69, 3-70

Shin-Etsu Chemical Co., Ltd.

3-88 ~ 3-90

3-88 ~ 3-90

3-88 ~ 3-90

Nippon Paper Industries Co., Ltd.

3-94 ~ 3-96

3-94 ~ 3-96

3-94 ~ 3-96

Mitsui Mining & Smelting Co., Ltd.

3-111

3-111

3-111

3-126, 3-127

3-126, 3-127

3-126, 3-127

Asset
ORIX Asset Management Corporation
Management
EnergyTransportation

Materials

NonFinancial

3-2

Stage 1Company

Fuji Oil Company, Ltd.

UACJ Corporation
Agriculture,
Food, and
ForestProducts

Maruha Nichiro Corporation

Electronic
Equipment

YASKAWA Electric Corporation

3-155, 3-156

3-155, 3-156

Information
Technology

SCSK Corporation

3-170, 3-171

3-170, 3-171

Retailing

ASKUL Corporation

3-179, 3-180

3-179, 3-180

3-142

3-142

3-155, 3-156

3-179, 3-180

Cases of scenario analysis by sector (FY2020, FY2021)

STEP3. Identify and define range of scenarios
STEP3. Identify and define range of scenarios
SectorFinancialCompany

Asset
ORIX Asset Management Corporation
Management
EnergyTransportation

Materials

NonFinancial

Stage 1

Stage 2

Stage 3Choosing scenarios

Obtaining forecast
information on relevant
parameters (viable)

Shaping worldview inconsideration of
stakeholders

3-15

3-16

3-17 ~ 3-21

3-38

3-34 ~ 3-37

1.5

Fuji Oil Company, Ltd.

3-33

Kyushu Railway Company

3-46

3-49

3-47, 3-48

Nishi-Nippon Railroad Co., Ltd.

3-57

1.5

3-58

3-59, 3-60

GUNZE LIMITED

3-71

1.5

3-76

3-72 ~ 3-75

Shin-Etsu Chemical Co., Ltd.

3-84

Nippon Paper Industries Co., Ltd.

3-97

1.5

3-100

3-98, 3-99

Mitsui Mining & Smelting Co., Ltd.

3-112

UACJ Corporation

3-113 ~ 3-116
1.5

3-129

3-130, 3-131

3-132, 3-133

3-143

3-144 ~ 3-147

3-158

3-159 ~ 3-162

Partially 1.5

Agriculture,
Food, and
ForestProducts

Maruha Nichiro Corporation

Electronic
Equipment

YASKAWA Electric Corporation

3-157

Information
Technology

SCSK Corporation

3-172

Retailing

ASKUL Corporation

3-181

1.5

3-173, 3-174
3-182

3-183, 3-184

3-3Cases of scenario analysis by sector (FY2020, FY2021)

STEP4. Evaluate business impacts
STEP4. Evaluate business impacts
Stage 1

SectorFinancial

Asset
Management
EnergyTransportation

Stage 2

Stage 3

Identifying potential financial
indicators affected by risks
and opportunities

Considering calculation
formula and estimating
financial impact

Being aware of the gap
between future outlook andfinancial indicators in thebusiness as usual

ORIX Asset Management
Corporation

3-22

3-22

3-23 ~ 3-26

Fuji Oil Company, Ltd.

3-39

3-39

Kyushu Railway Company

3-50

3-50

Nishi-Nippon Railroad Co., Ltd.

3-61

3-62

3-63, 3-64

GUNZE LIMITED

3-76

3-77

3-77

Company

3-85

Shin-Etsu Chemical Co., Ltd.
Materials

NonFinancial

Nippon Paper Industries Co., Ltd.

3-101

3-102, 3-103

Mitsui Mining & Smelting Co., Ltd.

3-117, 3-118

3-117, 3-118

UACJ Corporation

3-134 ~ 3-136

Agriculture,
Food, andMaruha Nichiro Corporation
Forest Products

3-4

3-148

3-149, 3-150

Electronic
Equipment

YASKAWA Electric Corporation

3-163

Information
Technology

SCSK Corporation

3-176

3-176

Retailing

ASKUL Corporation

3-185, 3-186

3-185, 3-186

3-163

Cases of scenario analysis by sector (FY2020, FY2021)

STEP5. Identify potential responses

SectorCompany

STEP5. Identify potential responses

STEP6. Document anddisclose information

Stage 1

Stage 1

Understandstatus on risk
management

Financial

Asset
Management
EnergyTransportation

Stage 2

ORIX Asset Management
Corporation

3-26

Fuji Oil Company, Ltd.

3-40

Kyushu Railway Company

3-51

Nishi-Nippon Railroad Co., Ltd.

3-65

GUNZE LIMITED

3-78

NonFinancial

3-89, 3-90

Nippon Paper Industries Co., Ltd.

Describe the results
obtained from each
step

3-27

3-52

3-52

3-66

3-104

3-83

3-89, 3-90

3-108, 3-109,
3-111 ~ 3-119,
3-122

3-104

Mitsui Mining & Smelting Co., Ltd.

3-119

3-120 ~ 3-122

UACJ Corporation

3-138

3-137

Agriculture,
Food, andMaruha Nichiro Corporation
Forest Products

Stage 2

3-78

Shin-Etsu Chemical Co., Ltd.
Materials

Stage 3

Establish an
Describe theConsider futureorganizational structure relationship between
countermeasures forand consider practicaltheclimate-related risk
countermeasures andrecommended
management andhow to proceed
disclosure items andseizing opportunities
scenario analysis
the scenario analysis

3-151

3-151

Electronic
Equipment

YASKAWA Electric Corporation

3-164

Information
Technology

SCSK Corporation

3-177

Retailing

ASKUL Corporation

3-187, 3-188

3-164

3-164

3-189 ~ 3-192

3-189 ~ 3-192

3-5

Cases of scenario analysis by sector (FY2018, FY2019)For beginning scenario analysis
For beginning scenario analysis
Company

Preparation

Preparation

Preparation

Preparation

Establishing an organizational
structure for scenario analysis

Setting target analysis

Setting timeline for analysis

the practical guide ver3.0
3-10, 3-11

the practical guide ver3.0 3-10

ITOCHU Corporation

the practical guide ver2.0 3-22

the practical guide ver2.0 3-24

Chiyoda Corporation

the practical guide ver3.0 3-42

the practical guide ver3.0 3-42

Gaining understandings
from managements
Financial

Banks

Development Bank of Japan Inc.

EnergyMitsui O.S.K. Lines, Ltd.

the practical guide ver2.0 3-39

Transportation Japan Airlines Co., Ltd.

the practical guide ver2.0 3-50
the practical guide ver2.0
3-55, 3-58

Mitsubishi Motors Corporation
Kajima CORPORTAION

NonFinancial

the practical guide ver3.0 3-62

Sumitomo Forestry Co., Ltd.
Tokyu Fudosan Holdings
Corporation

the practical guide ver2.0 3-86

the practical guide ver2.0 3-86

Construction
Materials

LIXIL Group Corporation

the practical guide ver3.0
3-73, 3-74

the practical guide ver3.0 3-74

the practical guide ver3.0 3-98

the practical guide ver3.0 3-100

the practical guide ver2.0 3-74

FUJIFILM Holdings Corporation
Materials

Food

3-6

the practical guide ver3.0 3-64

Buildings/
ForestProducts

the practical guide ver3.0
3-110, 3-111

the practical guide ver3.0 3-114

Kagome CO.,LTD.

the practical guide ver3.0 3-139

the practical guide ver3.0 3-141

Calbee, Inc.

the practical guide ver3.0 3-156

the practical guide ver3.0 3-158
the practical guide ver3.0 3-165

Furukawa Electric Co., Ltd.

Meiji Holdings Co., Ltd.

the practical guide ver3.0 3-165

Electronic
Equipment

KYOCERA Corporation

the practical guide ver3.0 3-182

the practical guide ver3.0 3-183

Retailing

Seven & i Holdings Co., Ltd.

the practical guide ver3.0 3-222

the practical guide ver3.0 3-225

Consumer
Product

Lion Corporation

the practical guide ver3.0 3-235

the practical guide ver3.0 3-235

Source:the practical guide ver3.0 3-235

nd / 3rd

Cases of scenario analysis by sector (FY2018, FY2019)

STEP2. Assess materiality of climate-related risks
STEP2. Assess materiality of climate-related risks
Stage 1

Stage 2

Stage 3

Listing risk items

Identifying potential impact
on business

Assessing materiality ofrisks

Development Bank of Japan Inc.

the practical guide ver3.0 3-13

the practical guide ver3.0 3-13

the practical guide ver3.0 3-13

ITOCHU Corporation

the practical guide ver2.0 3-23

the practical guide ver2.0 3-23

the practical guide ver2.0 3-23

Chiyoda Corporation

the practical guide ver3.0 3-43

the practical guide ver3.0 3-43

the practical guide ver3.0 3-43

Mitsui O.S.K. Lines, Ltd.

the practical guide ver2.0 3-38

the practical guide ver2.0 3-38

the practical guide ver2.0 3-38

Japan Airlines Co., Ltd.

the practical guide ver2.0 3-49

the practical guide ver2.0 3-49

the practical guide ver2.0 3-49

the practical guide ver2.0 3-56, 3-59

the practical guide ver2.0 3-56, 3-59

Company

Financial

Banks

EnergyTransportation

Mitsubishi Motors Corporation
Kajima CORPORTAION
Buildings/
ForestProducts

NonFinancial

Construction
Materials

the practical guide ver3.0 3-63

the practical guide ver3.0 3-63

the practical guide ver3.0 3-63

the practical guide ver2.0 3-72, 3-73

the practical guide ver2.0 3-72, 3-73

the practical guide ver2.0 3-72, 3-73

Tokyu Fudosan Holdings Corporation

the practical guide ver2.0 3-87

the practical guide ver2.0 3-87

the practical guide ver2.0 3-87

LIXIL Group Corporation

the practical guide ver3.0 3-75

the practical guide ver3.0 3-75

the practical guide ver3.0 3-75

FUJIFILM Holdings Corporation

the practical guide ver3.0 3-99

the practical guide ver3.0 3-99

the practical guide ver3.0 3-99

Furukawa Electric Co., Ltd.

the practical guide ver3.0 3-113

the practical guide ver3.0 3-113

the practical guide ver3.0 3-113

Kagome CO.,LTD.

the practical guide ver3.0 3-140

the practical guide ver3.0 3-140

the practical guide ver3.0 3-140

Sumitomo Forestry Co., Ltd.

Materials

Food

3-7

Calbee, Inc.

the practical guide ver3.0 3-157

the practical guide ver3.0 3-157

the practical guide ver3.0 3-157

Meiji Holdings Co., Ltd.

the practical guide ver3.0 3-166, 3-167

the practical guide ver3.0 3-166, 3-167

the practical guide ver3.0 3-166, 3-167

Electronic
Equipment

KYOCERA Corporation

the practical guide ver3.0 3-182

the practical guide ver3.0 3-182

the practical guide ver3.0 3-182

Retailing

Seven & i Holdings Co., Ltd.

the practical guide ver3.0 3-223, 3-224

Consumer
Product

Lion Corporation

the practical guide ver3.0 3-236, 3-237

the practical guide ver3.0 3-223, 3-224
the practical guide ver3.0 3-236, 3-237

Source:the practical guide ver3.0 3-236, 3-237

nd / 3rdCases of scenario analysis by sector (FY2018, FY2019)

STEP3. Identify and define range of scenarios
STEP3. Identify and define range of scenarios

Financial

Banks

Stage 1

Stage 2

Stage 3Choosing scenarios

Obtaining forecast
information on relevant
parameters (viable)

Shaping worldview inconsideration of
stakeholders

the practical guide ver3.0 3-14, 3-15

the practical guide ver3.0 3-13 ~ 3-15

the practical guide ver3.0 3-16 ~ 3-19

ITOCHU Corporation

the practical guide ver2.0 3-24

the practical guide ver2.0 3-25

the practical guide ver2.0 3-26, 3-27

Chiyoda Corporation

the practical guide ver3.0 3-42

the practical guide ver3.0 3-44

the practical guide ver3.0 3-45, 3-46

Mitsui O.S.K. Lines, Ltd.

the practical guide ver2.0 3-39

the practical guide ver2.0 3-40, 3-41

the practical guide ver2.0 3-42 ~ 3-45

Japan Airlines Co., Ltd.

the practical guide ver2.0 3-50

Development Bank of Japan Inc.

EnergyTransportation

Mitsubishi Motors Corporation

NonFinancial

the practical guide ver2.0 3-55, 3-58

Buildings/
ForestProducts

Kajima CORPORTAION

the practical guide ver3.0 3-64

the practical guide ver3.0 3-65

the practical guide ver3.0 3-66, 3-67

Sumitomo Forestry Co., Ltd.

the practical guide ver2.0 3-74

the practical guide ver2.0 3-81

the practical guide ver2.0 3-75 ~ 3-80

Construction
Materials

LIXIL Group Corporation

Materials

Food

3-8

the practical guide ver2.0 3-51, 3-52
the practical guide ver2.0 3-56, 3-59

Tokyu Fudosan Holdings Corporation

the practical guide ver2.0 3-88, 3-90
the practical guide ver3.0 3-74

FUJIFILM Holdings Corporation

the practical guide ver3.0 3-80

the practical guide ver3.0 3-76 ~ 3-79

the practical guide ver3.0 3-100

the practical guide ver3.0 3-101 ~ 3-104

Furukawa Electric Co., Ltd.

the practical guide ver3.0 3-115 ~ 3-117

Kagome CO.,LTD.

the practical guide ver3.0 3-141

the practical guide ver3.0 3-142

the practical guide ver3.0 3-143 ~ 3-145

Calbee, Inc.

the practical guide ver3.0 3-158

the practical guide ver3.0 3-159

the practical guide ver3.0 3-160, 3-161

Meiji Holdings Co., Ltd.

the practical guide ver3.0 3-165

the practical guide ver3.0 3-168

the practical guide ver3.0 3-169, 3-170

Electronic
Equipment

KYOCERA Corporation

the practical guide ver3.0 3-183

the practical guide ver3.0 3-184

the practical guide ver3.0 3-185 ~ 3-188

Retailing

Seven & i Holdings Co., Ltd.

the practical guide ver3.0 3-225

the practical guide ver3.0 3-226

the practical guide ver3.0 3-227, 3-228

Consumer
Product

Lion Corporation

the practical guide ver3.0 3-238

the practical guide ver3.0 3-239

the practical guide ver3.0 3-240 ~ 3-243

Source:nd / 3rd

Cases of scenario analysis by sector (FY2018, FY2019)

STEP4. Evaluate business impacts
STEP4. Evaluate business impacts
Company

Financial

Banks

Stage 1

Stage 2

Stage 3

Identifying potential
financial indicators
affected by risks andopportunities

Considering calculation
formula and estimating
financial impact

Being aware of the gap
between future outlook
and financial indicators inthe business as usual

Development Bank of Japan Inc.

the practical guide ver3.0 3-16 ~ 3-20

ITOCHU Corporation

the practical guide ver2.0 3-28

EnergyChiyoda Corporation

Transportation

the practical guide ver3.0 3-47

the practical guide ver3.0 3-48

the practical guide ver3.0 3-47

Mitsui O.S.K. Lines, Ltd.

the practical guide ver2.0 3-46, 3-47

Japan Airlines Co., Ltd.

the practical guide ver2.0 3-53

the practical guide ver2.0 3-46, 3-47

Mitsubishi Motors Corporation

NonFinancial

the practical guide ver2.0 3-56, 3-59

Kajima CORPORTAION

the practical guide ver3.0 3-69

the practical guide ver3.0 3-68

Buildings/
ForestProducts

Sumitomo Forestry Co., Ltd.

the practical guide ver2.0 3-83, 3-84

Tokyu Fudosan Holdings Corporation

the practical guide ver2.0 3-89, 3-91

Construction
Materials

LIXIL Group Corporation

the practical guide ver3.0 3-81

FUJIFILM Holdings Corporation

the practical guide ver3.0 3-105

the practical guide ver3.0 3-82, 3-83
the practical guide ver3.0 3-105

the practical guide ver3.0 3-106, 3-107

Materials
Furukawa Electric Co., Ltd.

the practical guide ver3.0 3-118, 3-119

Kagome CO.,LTD.
Food

the practical guide ver3.0 3-146

Calbee, Inc.
Meiji Holdings Co., Ltd.

3-9

the practical guide ver3.0 3-171, 3-178

Electronic
Equipment

KYOCERA Corporation

Retailing

Seven & i Holdings Co., Ltd.

Consumer
Product

Lion Corporation

the practical guide ver3.0 3-146

the practical guide ver3.0 3-147 ~ 3-148

the practical guide ver3.0 3-162

the practical guide ver3.0 3-162

the practical guide ver3.0 3-171, 3-178

the practical guide ver3.0 3-172, 3-179
the practical guide ver3.0 3-189

the practical guide ver3.0 3-229, 3-230
the practical guide ver3.0 3-244

the practical guide ver3.0 3-229, 3-230
the practical guide ver3.0 3-244

Source:the practical guide ver3.0 3-245, 3-246

nd / 3rdCases of scenario analysis by sector (FY2018, FY2019)

STEP5. Identify potential responses
STEP5. Identify potential responses
Stage 1Company
current status on risk
management

Financial

Banks
EnergyDevelopment Bank of Japan Inc.

Stage 2

Stage 3

STEP6. Document anddisclose information
Stage 1

Describe theConsider future
Establish an organizational
relationship between
countermeasures forstructure and consider
theclimate-related risk
practical countermeasures
recommended
management and seizing and how to proceed scenario
disclosure items andopportunities
analysisthe scenario analysis
the practical guide ver3.0 3-22

the practical guide ver3.0 3-23

ITOCHU Corporation
Chiyoda Corporation

the practical guide ver3.0 3-48

Mitsui O.S.K. Lines, Ltd.
Transportation Japan Airlines Co., Ltd.
Mitsubishi Motors Corporation
the practical guide ver3.0
3-70, 3-71

Kajima CORPORTAION
Buildings/
ForestProducts

NonFinancial

Tokyu Fudosan Holdings
Corporation

Construction
LIXIL Group Corporation
Materials
FUJIFILM Holdings Corporation
Materials

Food

3-10

Sumitomo Forestry Co., Ltd.

the practical guide ver3.0 3-84
the practical guide ver3.0 3-108 the practical guide ver3.0 3-108

Furukawa Electric Co., Ltd.

the practical guide ver3.0
3-118 ~ 3-120

Kagome CO.,LTD.

the practical guide ver3.0
3-149 ~ 3-152

Calbee, Inc.

the practical guide ver3.0 3-163 the practical guide ver3.0 3-163

Meiji Holdings Co., Ltd.

the practical guide ver3.0
3-173, 3-180

the practical guide ver3.0
3-173, 3-180

Electronic
Equipment

KYOCERA Corporation

the practical guide ver3.0
3-190 ~ 3-192

the practical guide ver3.0
3-190 ~ 3-192

Retailing

Seven & i Holdings Co., Ltd.

Consumer
Product

Lion Corporation

Source:the practical guide ver3.0 3-233
the practical guide ver3.0 3-247 the practical guide ver3.0 3-247
nd / 3rd

Stage 2
Describe the results
obtained from eachstep

Financial Sector (Asset Management)
Practice Case
ORIX Asset Management Corporation

3-11

Properties
Finance

Properties

3-12

3-13

3-14

3-15

3-16

3

3-17

3-18

3-19

3-2019

3-2120

3-22

3-23

3-24

3-25

3-26

3-27

EnergyPractice Case

3-28

Fuji Oil Company, Ltd.

Outline of Fuji Oil Company, Ltd.
Company Profile As of March 31, 2021
Company name
Established
OfficeApril 1964

Head office

Shinagawa-ku, Tokyo

Sodegaura Refinery
Capital Stock
Net sales

Sodegaura-city, Chiba

24.4 billion JPY

consolidated

Employees

Sodegaura Refinery

Fuji Oil Company, Ltd.

consolidated

344.6 billion JPY
704

3-29

Selection of Business covered
Crude oil imports

Storage

Main products produced in refineries
Product

Storage

Shipping/sales

Breakdown of petroleum product sales volume

Main applications use

LPG

Industrial-use propane gas, taxi fuelGasoline

Car fuel

Petrochemical-use
naphthaFeedstock for petrochemical products

BenzeneFeedstock for plastics

XyleneFeedstock for synthetic resins

Kerosene

Fuel for household heating appliances

Jet fuel

Fuel for jet powered passenger aircraft

Diesel fuelBus and truck fuel

Fuel oil A

Building heating fuel, small ship fuel

Fuel oil C

Power plant fuel, large ship fuelPetroleum pitch

Feedstock for coke used to make steel, boiler
fuel

3-30

Refining/
production

Others16%
Fuel oil A
3%
Petroleumpitch
4%
Xylene 4%

Gasoline
28%
Total
7,140,000KL
Fiscal year ending
March 2021

Petrochemical-use
naphtha4%
Kerosene
7%

Diesel fuel23%
Jet fuel7%

We have made thepetroleum refining/sales
business the scope of
this investigation (it is
the only segment FOC
operates)Steps to implement scenario analysis
1

2

Ensure governance is in place
Assess materiality ofclimate-related risksMarketchanges/
technology
changes3

Integrate scenario analysis into strategic planning and/or enterprise risk management processes. Assign oversight to relevant board
committees/subcommittees. Identify which internal (and external) stakeholders to involve and how.

4

Identify and define
range of scenarios

6
SourceDefinition ofcountermeasures

Reputation
Multiple scenarios that
include transition
risks/physical risks
related to the organization

Government
policies andlaws

5

Evaluatebusiness impacts

Physical risks

Impact on business:
Implementation costs
Business costs
Revenue
Supply chain
Suspension of operations
TimingCountermeasures:
Business model reforms
Portfolio reforms
Investment toward
capabilities and technology

Documentation and disclosure

TCFD Recommendations Technical Supplement: The Use of Scenario Analysis in Disclosure of Climate-related Risks and Opportunities

3-31

Assess materiality of climate-related risks

Step

2

3

4

5

Scenario4

1.5

Extract the climate-related risks and opportunities, assess materiality on a large, medium, or small scale[Overview of risk/opportunity items (excerpt including only significant items)]
Types

Transition

Physical

3-32

Assumed impact on business

Large classification

Small
classification

Policy/Regulation

Introduction ofcarbon pricesuch as carbon
tax etc.

Increased costs from introduction of measures such as a carbon tax,etc.

Technology

Technology
Progress

Decreased demand for petroleum products due to further
advancement of EV technology and energy conservation technology

Risks

Reduced sales due to decreased demand for petroleum products,
etc. accompanying the increased costs mentioned above

Changes incustomerMarket and Reputation
behavior/
Product demand

Decreased demand for petroleum products due to increased
environmental awareness (spread of EVs, expanded introduction ofrenewable energy, decreased use of petroleum-based plastics, etc.)

Increasing
severity andfrequency ofnatural disaster

Decline in utilization rates of production facilities and increase incosts needed for repair, etc., due to increasingly severe and frequent
natural disasters

Acute

Opportunities

Materiality
Signific
ance

Further improvements in energy efficiency through the introductionof cutting-edge energy conservation technologies
Introduction of decarbonization technologies and supply of synthetic
fuels, etc.
Increased demand for energy with low environmental impact(renewable energy, ammonia, hydrogen, biofuels, synthetic fuels,
etc.)
Expanding demand for chemical recycling products that leverage
conversion of waste plastic into oil, etc.

Increased demand for fuel oil due to reevaluation of the usefulnessof liquid oils (portability, ease of storage, mobility) in times ofdisaster

Large

Step

Identify and define range of scenarios
We will use two scenarios (1.5

,4

2

3

4

5

Scenario

4

1.5

4

5

Scenario4

1.5) to study society in 2050

Projected average global surface temperature change
average from1986 2005

compared with the

The TCFD recommendations for scenario analysis suggest thatmultiple temperature range scenarios be selected, including
those below 2

3-33

Identify and define range of scenarios
4

Step

2

3

worldview @2050s (Example)

Low carbonization/decarbonization does not progress, and physical risks increase
Direction for measures

Petroleum Industry
Sellers

Raw materials Supplier
Carbon tax introduction does not
move forward, and the current oil
supply status continues
Natural disasters become more
severe and frequent, and physicalrisks at supplier sites become
manifest

Sourcing diversification

Sellers

Energy etc.
Demand for renewable energy
increases to a certain degree,
but the cost remains highDependence on fossil fuelscontinues

New entrants

Buyers

New entrants are not assumed in this scenario

Customers

Industries

Spread of EVs, etc., does notprogress, and demand for internal
combustion engine fuels continues

Energy conservation / renewable energy initiatives arepromoted in line with established trends
Physical risks to refineries, business sites, and logistics
become manifest
Costs for disaster prevention and recovery costs whenaffected by a disaster increase
Procurement costs increase due to disruptions in the
supply chain

Strengthening refinery resilience throughdisaster preparedness / insurance coverage

Substitute products
Penetration of renewable energy and decarbonized fuels is
limited (hydrogen, ammonia, biofuels, synthetic fuels, etc.)

Awareness toward low
carbonization / decarbonization
does not increase, and use of plastic
products made from petroleumbased raw materials continues
Adoption of renewable energy anddecarbonized fuels by petroleum
product user companies is limited
Due to increasing physical risks,petroleum is reassessed as being a
useful energy source in times ofdisasterContinuing high refinery utilization
rates and maintaining sales volumeof petroleum products

Government
External pressure toward low
carbonization / decarbonization
is not as strong as in the 2 C /1.5 C scenarios, and a carbon
tax is not introduced
Regulations on sales of internal
combustion engine vehicles are
not introduced, and fuelefficiency regulations are nottightened significantly

Subsidies are established as sea
levels rise and water stressincreases
Regulations on the use of
petroleum-based plastics are
not introduced

Leveraging of subsidies, etc.
(Proactive collaboration withthe government, mainly
concerning physical risks)

33

3-34

Step

Identify and define range of scenarios
1.5

2

3

4

5

Scenario4

1.5

worldview @2050s (Example)

As external pressure to decarbonize increases, refineries shift to low carbonization and decarbonized fuels
Direction for measures

Petroleum Industry
Sellers

New entrants

Raw materials Supplier

Ventures, etc., with strengths related to renewable energies,
etc. enter the field
Strengthening of partnerships(e.g., alliances, M&A)

Crude oil supply decrease andinterest becomes stranded assets
due to tighter emission regulations
and carbon taxes introduced byvarious countries

Industries

Awareness toward decarbonization
increases, and there is decreased use ofplastic products made using petroleumbased raw materials

Cost burden due to the introduction of a carbon tax increases,
price competitiveness with other energy sources declines,
sales volume of petroleum products decreases

Financing costs increase due to difficulty in raising capital

Sellers

Energy etc.

Strengthening of partnerships(e.g., alliances, M&A)

Share of renewable energy
increases

Regulations on sales of internal
combustion engine vehicles are
introduced, and fuel efficiency
regulations are tightened

Regulations on the use of
petroleum-based plastics are
introduced

Entry into
decarbonization business

Substitute products

Renewable energy-related
investment

A carbon tax is introduced

Demand for products / services /technology development aimed at
reducing environmental impact
increases

Low-carbonization of refineries

Share of fossil fuel use declines

Subsidies/incentives toward
renewable energy /decarbonized fuels increase

Adoption of renewable energies anddecarbonized fuels by client companies
progresses, and there is decreased
demand for petroleum products

Investment in renewable energy business, etc., increases due
to introduction of a carbon tax

Strengthening partnership with
suppliers related to decarbonized fuels

The government promotes useof renewable energy /electrification initiatives aimed
at achieving ambitious emission
reduction targets

Demand for gasoline decreases due tospread of EVs

Low-carbonization of refineries

Changing to sources with low
environmental impact

Government

BuyersCustomers

Leverage of subsidies, etc.

Renewable energy and decarbonized fuels spread
Demand for electricity increases due to spread of EVs

Entry into decarbonization business

34

3-35

Identify and define range of scenarios
4

Step

2

3

4

5

Scenario4

1.5

worldview @2050s (Example)

Low carbonization/decarbonization does not progress, and physical risks increase
Government
Carbon tax not
introduced

CO2

Subsidies established due torising sea levels and increased
water stress

Petroleum product sales
volume maintained

TAX

Oil resource
development
progresses, and thecurrent crude oil supply
continues

Increased disasterprevention costs anddisaster recovery costs

Increase in insurance
premiums due to more
severe / more frequent
natural disasters

Limited adoption ofrenewable energy anddecarbonized fuels

Customers

EVs, etc., do not become
popular, and fuel demand forinternal combustion engine
vehicles continues

Suppliers

Physical risks torefineries/business sites/logistics
become manifest

Physical risks to supplier sites
become manifest

Use of plastic products
made from petroleumbased raw materials
continues

35

3-36

Identify and define range of scenarios
1.5

2

Step

3

4

5

Scenario4

1.5

worldview @2050s (Example)

As external pressure to decarbonize increases, refineries shift to low carbonization and decarbonized fuels
Increased subsidies toward
renewable energy /decarbonized fuels

Government

CO2

Decreased sales volumeof petroleum products

Introduction of renewableenergy and decarbonizedfuels moves forward

TAX
Decreased pricecompetitiveness of
petroleum products due tointroduction of a carbon tax

Introduction of acarbon tax

H2

Decreased demand forgasoline and increased
demand for electricity
due to spread of EVs

Low carbonization ofrefineries

Banks, Investors

H2

Customers

Stronger engagement indecarbonized management

Suppliers

H2

H2

New entrants

Increased investment inrenewable energy
business, etc.

Decreased crude oil supply
due to reduced oil resource
development

Ventures, etc., withstrengths in renewableenergy, etc., enter the field

Use of plastic products made using petroleumbased raw materials decreases, and use of recycledplastics, etc., increases

36

3-37

2

Step

Identify and define range of scenarios

3

4

5

Scenario4

1.5

Definition of each of the worldviews based on scientific evidence, etc., from IEA and other sources
Key items
Policy/Regulation

Assumedparameters
Carbon tax
Petroleum supply
amountChanges in
product demand GHG emission
factor forelectricity

Changes incustomer
behavior

Unit

At present

Advancedcountries

USD/t-CO2

World

EJ

4

1.5

Sources

2030

2050

2030

2050

0

-

-

130

250

IEA World Energy Outlook 2021

171

199

198

137

42

IEA World Energy Outlook 2021
Agency for Natural ResourcesJapan

Kg-CO2/kWh

0.45

0.27

0.10

0.34

0.03

Number ofvehicles equippedwith engines on
the roadWorld

100 million cars

13.9
12.7

15.1

11.5

15.1

3.9

Recycled plastic
usage rate

World

%

10.6%

10.6%

10.6%

16.1

26.0

Baseline

40%

120%

Increasing
severity andIncrease infrequency of flooding frequency
natural disasters

3-38

Parame-ter
area

Japan

20%

60%

RITE "Scenario Analyses for 2050
Carbon Neutrality in Japan"
IEA Energy Technology
Perspectives 2017
Plastic Waste Management
Institute Plastic Strategy inEurope, JPCA
Ministry of Land, Infrastructure,
Transport and Tourism

Step

Evaluate business impacts

2

3

4

5

Scenario4

1.5

We estimate the impact on P/L of each of the risk/opportunity categories evaluated asbased on the parameters described previously
ImpactItems

4

Outline of impacts

1.5

2050

2030

2050

changes in demand for petroleum products
Changes in product demand
Expanded demand for energy sources with low environmental impact(biofuels, hydrogen, synthetic fuels)

N/A

Increased costs related to CO2 emitted by FOC
introduction of carbon pricing from carbon taxation, etc.

N/A

Increase in costs
Increased insurance premiums due to more frequent natural
disasters

3-39Countermeasure definition

Step

2

3

4

5

Scenario4

1.5

We consider directions for future initiatives based on the previously described impact estimate items
Items

Changes in product demand
Increase in costs

Countermeasure examples

Entry into decarbonized fuel business (ammonia, hydrogen, biofuels, synthetic fuels, etc.)
Expansion of renewable energy businesses
Further deepening of energy conservation activities and investments
Promotion of changing fuels used in refining processes
Leveraging of renewable energy sources
R&D/leveraging of decarbonization technologies (CCU/CCUS, etc.)
Reviewing of CO2 emission levels to aim for in the medium to long-term*Consideration based on technological development progress and economic viability

Promotion of refinery resilience by strengthening facilities and improving the viability of the BCP (business
continuity plan)
Continuous review of insurance

3-40Transportation
Practice Case
Practice Case

Kyushu Railway Corporation
Nishi-Nippon Railroad Co., Ltd.

3-41

1. Covered business[Selection of businesses covered in this project]

Business portfolio
Other
8.8%

Retail /food service

24.1%

38.4%

Transportation
service

Other

15.2%
Total operating profits
173.7 billion yen*1

Total operating profits
432.6 billion yen(March 2020 term)(March 2020 term)

8.7%

Construction

147.3
billion yen

84.8%
20.0%

Railway passenger
transport

Real estate/hotels

Value chain for the covered business (hypothesized)

3-42Transition risks

Transition risks

Train cars procurement

Energy procurement

Development of lowemission products
Spread of low-carbon
technologies
Spread of renewableenergy/energy-efficienttechnologies

Carbon pricing (gasoline tax)
Changes in prices for significant
commodities/products(electricity/gasoline prices)
Policies for energy efficiency(stricter energy efficiency
standards)
Shifts in energy demands
Subsidy policies for renewableenergy, etc.
Fossil fuel subsidies

Note 1: Prior to the elimination of inter-segment transactions

Transition/physical risks
Power transformation/energy supply

Operations
Extreme weather conditions
Changes in precipitation/weather
patterns
Increased average temperatures
Changes in reputation withcustomers
Development of next-generation
technologies
Water stress (droughts)
Elevated sea levels

Scenario analysis steps
1

Establishinggovernance

Incorporate scenario analysis into strategy formulation and risk management processes. Perform monitoring of relevant board meetings.
Identify which internal/external stakeholders to involve and how to involve them.

2
Risk significanceanalysisMarketchanges/
technology
changes

Government
policies and
laws

6

4

3

Documentation andinformation disclosure
Source: TCFD

Business impact
assessment

Multiple scenarios that
include transition
risks/physical risks
related to the organization

Impact on business:
Implementation costs
Business costs
Revenue
Supply chain
Suspension ofoperations
TimingReputation

Physicalrisks

5

Scenario groupdefinition

Definition ofcountermeasures

Countermeasures:
Business model
reforms
Portfolio reforms
Investment toward
capabilities andtechnology

Direction of disclosure as a tool for internal/external dialogue, disclosure of significant products andtechnologies

Technical Supplement: The Use of Scenario Analysis in Disclosure of Climate-Related Risks and Opportunities

3-43

Step

2. Significance assessment of risks/opportunities
Climate-

3-44

2

3

4

5

Step

2

3

4

5

2

3

4

5

2. Significance assessment of risks/opportunities

3-45

3. Scenario group definition

Step[Selected scenarios]
2

-term

which incorporates a delay in recovery from the COVID-19 pandemic
Definition of[Projected average global surface temperature change](compared with the average from 1986-2005)
3.2-Industrial Revolution
levels if no additional measures against global
warming are taken
scenario:
2.7-Industrial
Revolution levels if no additional measuresagainst global warming are taken

0.9higher than pre-Industrial Revolution
levels if strict measures are taken

2050

3-46

Prior to 2030, the change in temperature is nearly the same inscenarios.
The gap between the scenarios widens after 2030.

scenario:
We are highly likely to achieve an increase of-Industrial
Revolution levels if a radical transition to a
new system is made.

The TCFD recommendations for scenario
analysis suggest that multiple temperature
range scenarios be selected, including3. Scenario group definition[Visual representation of a 2

Step

2

3

4

5

scenario future society (assumed as 2050) ]Low-carbonization moves forward and modal shifting occurs; renewable energy and smart cities
become popular
There is a slight increase in damage totransportation equipment / railway carsand infrastructure due to extreme
weather / increased temperatures

Urban areas
Transportation will become
more convenient with theadvancement of smart
cities and MaaS

Human inflow(modal shift)
Extreme weather

There is a shift from airplanes
to railways from increased
environmental awareness

Environmentally friendly railway cars
Promotion of renewableenergy use and development ofenvironmentally friendly railways

3-47

Metropolitan
areas

Railways may lose theiradvantage due to the spreadof automatic driving
technology for automobiles

Advancement of carbon
taxes/conversion to smart
citiesRenewable energy
Iron and Steel price rise, andtrack replacement costs
increase

Humanoutflow

Railways may lose theiradvantage from anenvironmental perspective
due to the spread ofenvironmentally-friendly
automobiles

Support for the use of renewable energy,
subsidies for introducing environmentallyfriendly transportation equipment, etc.

Government

3. Scenario group definition

Step

2

3

4

5

Extreme weather becomes more severe, and progress for smart cities is left to the course of nature
There is an increase in damage
to transportation equipment /railway cars and infrastructure
due to extreme weather /increased temperatures

Urban areas

There is no increase inenvironmental awareness,and the shift from airplanes torailways is limited

Progress for smart cities and
MaaS is left to the course ofnature, and there is only a limited
increase in customers

Metropolitan areas
There are increased
cancellations and delays due
to flooding

Extreme weather

Popularization of renewableenergy does not advance, andintroduction of environmentallyfriendly railways is limited

Renewable energy

3-48

There is an increase infuel costs due to rising
diesel oil prices

CO2
Government policies toward
energy efficiency / renewableenergy are not actively
promoted (carbon tax is not
introduced)

Human
inflow
Delay(DRS)

There may be an influx ofcustomers to railways due tohigher crude oil prices

There may be a decreasein demand for travel due
to reduced GDP

Decrease intravel demand

There are decreased

Increased support opportunities for goingoutdoors in summer due
for disasterto rising temperatures
preparedness

GovernmentBusiness impact assessment

Step[Table of parameters used]

2

3

4

5

*Exchange rate: 1 USD = 105 JPY (based on the October 1, 2020 rate)

We performed an estimate based on scientific evidence from IEA and other sources
2050

Currently

Transition risks(increase in
expenses)

Transition risks(spread of lowcarbon
technologies)

SourceEnergyCarbon tax

---

---

$191/t-CO2

Electricity price$216/MWh$184/MWh$242/MWh

IEA:

EnergyCrude oil price$63/Barrel$96/Barrel$48/Barrel

IEA:

Energy Outlook 2020

Iron and Steel price$350/t$382/t$506/tAir passenger
volume growth rate

6,290 billion/pkm

Domestic/international:
158%

Domestic/international:
80%
Domestic: 47%,
International: 99%

Number of
automobiles with
low-carbon
technology

1,525,850,630

1,339,099,724

Estimated using IEA:

Number of EVs/fuelcell vehicles in use

380,981,575

963,804,456

Estimated using IEA:

Number of selfdriven vehicles inuse

641,900,000

641,900,000

Increase intemperature

will be equivalent to current levels-o-Meter
Reference Scenarios for Financial-o-Meter
Reference Scenarios for Financial

Estimated using Fuji Chimera Research

Change Knowledge

Average

Flood frequency

1x

4x

2x

Probability oflandslides

10%

12%

12%

Probability of track
buckling

0.6 - 0.63

0.94%

0.65%

Review Meeting of Technologies Related
to Flood Control Planning Based on

Physical risks

3-49

Business impact assessment

A-PLAT: An information platform adapted
to climate change
ELSEVIER:

2017

Step

will be created if the environmental advantages of railways are maintained
There will be increased costs due to greater severity of natural disasters

3-50

2

3

4

5

5. Countermeasure definition

2

Step

3

4

[Future countermeasures against individual risks (planned)]
Risk
initiatives

Opportunit
y initiatives

Item
Targets
For CO2 emissions
reductions

Carbon pricing /energyPromoting
Promotinguse ofenergyrenewable Advances
efficiency
inenergynext-gentechnologi
esAdvances in
low-carbon
technologies

Extreme weather
conditions

3-51

Category

Risk countermeasures (initial plan)

AdaptedSet long-term targets for reducing CO2
emissions
Set long-term targets for reducing energy
usage

Category

Established5Counterme
asurestowardorganizatio
nal issues

Initiatives for seizing opportunities(initial plan)

Implement long-term targets for
reducing CO2 emissions
Plant trees to achieve disaster
preparedness while acquiring emissions
credits for absorbing CO2 at the same time

AdaptedInvest in energy-efficient technologies
Continue introducing energy-efficient train
cars

AdaptedDevelop and introduce renewable energy train cars
Use renewable energy to achieve BCP measures(emergency power generation) while achieving
decarbonization at the same time

Adapted/established

Promote the use of private power
generation and sell electricity

AdaptedDevelop and introduce of renewableenergy train cars

EstablishedLand prices will increase due todevelopment around stations from theprogress of smart cities / MaaS

Retained

Utilize data to increase the sophisticationof risk models

Established

Plant trees to achieve disaster
preparedness while acquiring emissions
credits for absorbing CO2 at the same time

6. Direction for information disclosure
disclosing what you are able to in line with these
2. Scenario Analysis and Future Policies and Initiatives

Governance

Strategy
1 Risks and opportunities
2 Scenario Analysis and Future Policies
and Initiatives

Risk management

Parameters and targets

3-52

We analyzed the effect of climate change on our railway business, based on
2 to 4 * scenarios outlined by specialist institutions, such as the IPCC
(Intergovernmental Panel on Climate Change) and IEA (International Energy
Agency). Under the 2 scenario, which anticipates an increase in carbon taxes
and cost increases due to the adoption of renewable energy, if theenvironmental superiority of railways can be maintained, then there will be ashift of customers from other means of transportation, and we will be able tosecure opportunities to increase sales.
In addition, under the 4 scenario, due to the increasing frequency/severity ofnatural disasters caused by climate change, there will be damage to railway
assets and an increase in maintenance costs, as well as a decline in sales dueto the suspension of operations.
For society and for the Company, The Group will work to advance initiatives forthe achievement of the 2 world to facilitate the realization of a sustainable
society.
* Including IEA 2020 scenario of 2.7 or higher

Transportation
Practice Case
Practice Case

Kyushu Railway Corporation
Nishi-Nippon Railroad Co., Ltd.

3-53

Covered business
Assumes that the bus business, which has the highest percentage of CO2
emissions among all Nishitetsu Group businesses, is the target.
Business portfolio

Transportation Business

Other
9.9%

Leisure /Services
5.9%

Logistics Industry

30.2%

Other

16.2%

Consolidated
operating revenue
346.1 billion
JPY FY2020

19.0%

17.5%

Railway
Business
Real EstateBusiness

Bus Business
OperatingPublic transportation revenue 31.2 billion JPY
revenue 59.8
billion JPY 58.0% Tourist buses, etc. revenue 2.2 billion JPY

23.0%

FY2020CO2 emissions from the bus
business account for about
50% of the Nishitetsu Group's
total CO2 emissions

20.2%
Distribution Industry
Value chain for the covered business hypothesized
Transition risks
Train cars procurement
Carbon emissions targets/policies ineach country
Changes in important
products/prices
Spread of low-carbon technologies
Development of next-generation
technologies
Changes in customer reputation /behavior

3-54

Transition risks
Energy procurement
Carbon price including gasoline
tax
Carbon emissions targets/policies ineach country
Changes in energy mix
Spread of low-carbon technologies
Development of next-generation
technologies
Changes in customer reputation /behavior

Transition Physical risks
Power transformation /energy supply

Operations
Carbon emissions targets/policies ineach country
Spread of low-carbon technologies
Development of next-generation
technologies
Changes in customer reputation /behavior
Changes in rainfall and weather patterns
Increase in average temperature
Increasing severity of extreme weather
conditions

Step2 Significance assessment of risks/opportunities
Climate-related risks and opportunities in Nishitetsu
Type
Carbon tax

Evalua
tion
Large

Risks
-Increased costs due to introduction of a carbon
tax

Regulations

Largetransition to EV buses, etc.
-Difficult to continue business if these cannot be
addressed

Transition Risk

-Increased operation costs such as storage battery

Largemanagement costs and replacement costs-Increased maintenance costs for EV buses, etc.
-Increased hard infrastructure construction costsTechnologies-Preemptive investment/introduction made possible
through implementation/strengthening of policies
and subsidy programs to promote the spread of EV
buses-Lower prices for EV buses, etc., and the capacity to-Increased procurement costs for EV buses, etc.

Spread of lowcarbon
technologies-Decreased fuel procurement costs due to introductionof EV buses, etc.

-Costs incurred for addressing demands to

PolicyOpportunities

for fueling facilities, etc.

travel long distances lead to lowered vehicle
procurement costs and barriers toward introduction-Reduced fuel procurement costs due to improved fuelefficiency from lighter vehicles-Increased sales due to the introduction of mixed
passenger-cargo transportation-Revenue source secured through leveraging storage
battery for energy management, etc.

Developmentof nextgeneration
technologies-Costs incurred for introducing automated driving

Large

technology-Increased maintenance costs for automatedvehicle fleet-Reduced costs from the spread of automated driving
technology curbing fuel and personnel needs-Increased sales due to active use of public
transportation due to the spread of MaaS and AI ondemand services, etc.

3-55

Step2 Significance assessment of risks/opportunities
Climate-related risks and opportunities in Nishitetsu
Type

Changes inTransition Risk

customer
reputation

Reput
behavior
ation

Changes ininvestor's
reputation

Evaluation

Risks

Opportunities-Reduced sales due to increased customer
environmental awareness if active environmental environmental awareness causing them to shift tomeasures are not takenbuses, which have low CO2 emissions per unit of-Reduced sales due to decline in theLargeenvironmental superiority of buses as a result oftransportation volume,
increased use of EVs, etc.
-Increased sales due to a shift to using buses caused-Reduced sales due to more people working fromby increased fuel burden for private automobiles
home

Mediu
m

-Decline in stock price and increased cost ofcapital if active environmental measures are nottaken-Decreased cost of capital due to expanded ESG
investment if transition to low-carbon andenvironmentally friendly business is succeeded-Increased cooling costs and capital investment
costs

Physical Risk

Mediu -Response costs incurred due to reduced
operating capacity associated with impacts onmIncreasing
severity of
Acute extreme-Reduced sales due to people being reluctant togo outdoors-Reduced sales due to traffic stoppages on roads-Improved reputation through the provision of storageand in tunnels, etc.
batteries as an emergency power source during-Costs incurred for repairing vehicle damage andblackouts
for measures toward the safety and health of onLarge-Trust gained from customers through thesite employees
development of disaster-resilient operating structure,-Reduced sales due to people being reluctant tosuch as planning multiple detours
go outdoors

weather
conditions
3-56-Increased costs for measures against heat stroke

Increase in
Chroniaveragectemperatureroad surfaces and vehicles

Step3 Identify and define range of scenarios
4 and 1.5 scenarios as of 2030 and 2050 are assumed from the viewpoint of
Definition of 4
2.7
scenario
the range of impact of climate change
Projected average global surface temperature change
compared with the average from 1850 1900

4

3.2

5.4

scenario

3.2 5.4 higher than pre-industrial Revolution levels if noadditional measures against global warming are taken
SSP3-7.9 +2.8 4.6
about 3.6

Over 22.7

4

scenario

2.7 4.0 higher than pre-industrial Revolution levels if noadditional measures against global warming are taken
SSP2-4.5 +2.1 3.5
about 2.7

2scenario SDS

0.9 2.3 higher than pre-industrial Revolution levels ifstrict measures are taken
SSP1-2.6 +1.3 2.4
about 1.8

1.5
2030

scenario

We are highly likely to achieve an increase of less than 1.5
compared to pre-industrial Revolution levels if a radicaltransition to a new system is madeSSP1-1.9 +1.0 1.8
1.4

2050

The TCFD recommendations for scenario analysis
suggest that multiple temperature range scenarios
be selected, including those below 2
Almost the same temperature changes would occur in the 2 and 4 scenario by 2030. The gap between the scenarios widens after 2030.
A best estimate of equilibrium climate sensitivity (ECS) of 3 , with a likely range of 2.5 to 4 , and a very likely range of 2 to 5 in 2100.
Global warming will exceed 1.5 and 2 during the 21st century unless CO2 and other greenhouse gas emissions decrease substantially inthe coming decades.
It is important to draw an appropriate transition path focusing on decarbonization by 2050 for each timeframe selected in the scenario analysis
3-57

Step3 Identify and define range of scenarios
Definitions of various worldviews based on scientific evidence from IEA andother sources*Exchange rate: 1 USD = 110 JPY (based on the Sept. 1, 2021 rate)*Items in blue are items for which 2ºC parameters were used due tothe 1.5ºC parameters not being available

Key items

Assumedparameter

Carbon tax(Carbon borderadjustment
Carbon emissions
mechanism)
targets/policies in
Spread ofeach country
environmentallyfriendly vehicles(EV/FC buses)

Parameter
area

2030
Unit

Source4Developed
Yen/tCO2
countries

2050

BAU
1.5

4

1.5

-

-

14,300-27,500IEA WEO2020
IEA NZE2050
4 scenario is assumed to be thesame as the current level

World

%

-

2%

23%

6%

79%

IEA WEO2020
IEA NZE2050

Percentage change
in price of fuel

World

%

-

21%

-5%

48%

-35%

IEA WEO2020
IEA NZE2050

Electricity prices

Japan

Yen/MWh

23,76022,88025,41019,36025,850IEA WEO2018

World

%

-

-

-

-

20-50%IEA NZE2050
4 scenario is assumed to be thesame as the current level

Japan
Hokkaido
Northwest
ern
Kyushu

%

-

40%

15%

40%

15%

Changes in theenergy mix

Changes in numbers
Development ofof private automobile
next-generation
users / bus users due
technologies
to decarbonization
Increasing
severity of
extremeweather
conditions

3-58

Rate of change ininstances of rainfall
continuing for 12hours or moretakes Climate Change into Account:Group on Flood Control Planning thattakes Climate Change into Account)* IEA (International Energy Agency): The IEA was established in 1974, after the first oil crisis, as an autonomous organization within the framework of the OECD.
Its executive office is located in Paris. It has earned a high international reputation for its expertise in all aspects of energy policy.

Step3 Identify and define range of scenarios
1.5

be important to address trends aimed at decarbonization such as the spread of renewable energy, conversion
Scenario Ittowill
zero-carbon cities, and modal shift

Government

EV buses, etc., become more widespread due to active implementationof climate change-related regulations and subsidy payments

The share of renewable energy
increases significantly, and there is aslight increase in electricity prices due
to increased demand
Energy costs increase due to theintroduction of a carbon tax

Energy mix

Diesel prices rise due to introduction of a carbon tax
Introduction of road pricing for private automobiles

EV

Nishitetsu

Modal shift fromusing private
automobiles to using
buses occurs

Increased vehicle/infrastructure(Technological advancement) costs, etc., for promoting the
AutoDrive

Extremeweather
FC

Rapid progress in conversion to smart zero-carbon cities and
MaaS, fewer customers due to population decline andpromotion of working from home

ZeroCarbon City

Ride-share taxis
emergeDevelop/sell EV buses to other companies
Promote automated driving technology (andmore compact vehicles to accompany this)
Improve electricity efficiency
Participate in VPPs

Increased electricity
efficiency

FC

EV

Modal shift

introduction of EV buses, etc.

ZeroCarbon City

Implement mixed passengercargo transportation
Participate in VPPs

Residential
area

VPP

EV

Conversion tosmart cities / MaaS

Urban center

3-59

Requests for companies to disasterprevention and mitigation measures
Disaster prevention subsidies

GAS(Introduction of renewable energy
sources, increased electricity prices)

EV

Policies implemented to a certain degree
to prepare for increased extreme
weather events

A carbon tax, road pricing
Renewable energy promotion / energy management initiatives
Initiatives for popularizing environmentally friendly vehicles (potential
regulations on internal combustion engine vehicles)

Damage to vehicles and reluctance inpeople to go outdoors due toincreasing severity of extreme
weather conditions (more limited
than in the 4ºC scenario)

EV

Strengthen disaster prevention
measures
Provide buses as shelters andemergency power sources

Step3 Identify and define range of scenarios
4

Scenario

Significant modal shift does not occur, and customer numbers continue in line with current trends; measures toaddress extreme weather will be important

Government

No significant changes seen in climate change-related
policies
Renewable energy promotion initiatives (limited)
Promotion initiatives for EV buses, etc. (limited)

CO2

Aggressive implementation of policies to prepare forincreased extreme weather events
Requests for companies to disasterprevention and mitigation measures
Disaster prevention subsidies

Modal shift from using
private automobiles to using
buses is limited

The renewable energy share
increases slightly, but the energy
mix continues to be mainly fossil
fuel-based, and diesel prices rise

Energy mix

DIESEL

Modal shift(Rising diesel prices)

DIESEL

CO2

Nishitetsu(Technological advancement)
EV

AutoDrive

Limited introduction of EV buses, etc.,
changes in customer numbers in linewith current trends
Promote automated driving
technology (and more compact
vehicles to accompany this)
Improve fuel efficiency to acertain level

CO2

Increased fuelefficiency

DIESEL

DIESEL

Conversion to smart cities and MaaS continues inline with current trends, fewer customers due topopulation decline and promotion of working
from home
Implement mixed passengercargo transportation

3-60

Urban center

Extremeweather

Residential
area

Conversion tosmart cities / MaaS

Damage to vehicles and reluctance inpeople to go outdoors due toincreasing severity of extreme
weather conditions
Strengthen disaster prevention
measures
Provide buses as shelters andemergency power sources

EVStep4 Evaluate business impacts
Considering the impact of each key driving force on the income statement (P/L)

Increase of carbon tax

Decrease of sales due to increasing severity of
extreme weather conditions
Decrease inrevenue frombus operationfrom previous
years(yen/year)

Carbon price(yen/t-co2)

Percent of
increase in daysof continuous
heavy rain (%)

Scope 1, 2
emissions

Fluctuation of energy prices

Amount of fuel used
(L/year)

Changes in sales of bus business
affected by climate change

Revenue frombus operation(yen/year)

Percent of
increase inrevenue frominflux of private
automobile
users (%)

Number of
possible trips
using mixed
passenger-cargotransportation(trips/year)

Revenue frommixed passengercargotransportation(yen/trip)

Number of units
that canparticipate in
VPPs(units/day)

Revenue from
VPP
participation(yen/day)

Percent of increasein fuel prices (%)

Expenses
Increase of damage of increasing severity of
extreme weather conditions

Sales

Percent of
increase in daysof continuous
heavy rain (%)

Amount of damage
in previous years(yen/year)

Introduction of EV buses etc.
Number of EV
bussesintroduced(units/year)

Business impacts

Cost increase fromvehicle introduction(yen/year)

Net income: Internal information used

3-61

Step4 Evaluate business impacts
1.5 Scenario Opportunity creation from bus superiority accompanying the introduction of EV buses, etc., can be expected
Fuel procurement costs are expected to increase
4 Scenario
Risk items

Assumed impacts

Carbon price
Including gasoline tax etc.

Transitionrisk

4

Carbon prices rise due to increased demand in developing

targets/policies in each country

subsidies

Introduction of EV buses etc.

4

Spread of low-carbon

1.5

4

---

--

countries
1.5

1.5

Introduction increases due to government policies such as

4
1.5

technologies

4

Spread of technology increases due to increased introduction of

Use of MaaS and on-demand services, etc. increases
Spread of use is limited
Modal shifts, etc. advance4

Modal shifts, etc., are limited

1.5

weather conditions

4+-

Spread is limited

1.5

Increasing severity of extreme+++

Introduction is limited

EV buses, etc.

Development of next-generation

Changes in customer behavior

3-62

Carbon prices rise due to introduction of a carbon tax

Carbon emissions

technologies

Physicalrisk

1.5

Degree of impact

Damage to facilities and suspended operations increase slightly
Damage to facilities and suspended operations increase

+++
-

-

Step4 Evaluate business impacts
1.5

Scenario 2050

Although the introduction of a carbon tax will result in a significant cost increase, implementation of countermeasures is
expected to enable an increase in profits
Recovery due to implementation
Business impact
of countermeasures

Uncalculated(Uncertain)

0.00

7.2

In the 1.5ºC scenario, it will be important to aim to recover from the impact of carbon tax through countermeasures
such as the introduction of EV buses, etc.
3-63

Step4 Evaluate business impacts
4

Scenario 2050

It is expected that there will be a massive increase in costs due to rising diesel prices, which will ultimately result in a
deficit great enough that it will become difficult to continue the businessBusiness impact

Carbon tax is notexpected in Japan

Operatingincome3-64

Carbon tax
Iintroduction

Rising diesel
oil prices

Increased cost of
Decrease of bus
damage due tooperation revenue
Operating income
heavy rains etc. due to heavy rains etc.

In the 4ºC scenario, rising diesel prices and risks from extreme weather will become manifest

Step5 Countermeasure definition
It will be important to develop targets based on sustainability, and use alliances with regional governments and energy-relatedcompanies to form business models and ecosystems while promoting the introduction of EV buses in the ride-sharing business
Items

Risk countermeasures
Category

Countermeasures

Initiatives for seizing opportunities
Category

Countermeasures

AdaptedSet CO2 emission reduction targets
Make a declaration for becoming carbon neutral (or carbon
negative)
Clarify details of profitability assessment and lobby thegovernment with the aim of obtaining subsidies (e.g.,
establish a consortium with bus-related businesses)

Established

Shift toward bus infrastructures adapted to zero carbon /compact cities
Promote goal development / actions based onsustainability (e.g., community development that achieves
mobility for local residents and makes business activities
carbon neutral)

AdaptedContinue to invest toward increased fuel efficiency of diesel
buses
Shift from diesel to biodiesel, etc.
Shift to renewable electricity
Raise fares to make up for higher energy prices (pricing
strategy)

Established

Implement private power generation / sell electricity

Low-carbon
Nextgeneration
technologies

AdaptedIntroduce EV buses in the ride-sharing business
Consider charter business initiatives (express buses, etc.)

Established

Implement mixed passenger-cargo transportation
Maximize use of storage batteries through alliances withother companies
Continue to invest toward manufacturing/sales of modified EV
buses, etc.

Changes incustomer
reputation
behavior

Retained

Sell eco-company commuter passes / continue to provide
operating information via bus location system
Continue on-demand bus operations

Established

Promote behavioral change toward use of decarbonizedtransportation

Prepare a bus operating structure that plans multiple detour
routes, etc.
Review contracts with insurance companies / vehicle
manufacturers in anticipation of extreme weather events

Established

Build and test an emergency power supply plan using EV
buses

Carbon Price,
Carbonemissionstargets/
policies ineach country

Changes inenergy mix

Increasing
severity of
extremeweather
3-65 conditions

AdaptedRetained

Direction for TCFD Scenario Analysis
It will be important to apply scenario analysis across the company and incorporate it into medium-term management
plans, and to make policy statements to external parties
Response
periodPresent
for a few
monthsa yearMost recent action plans
For internal

For external

Establish an implementation structure to promoteclimate change-related initiatives, including scenario
monitoring-Make disclosures of / endorsements for TCFD
information (e.g., scenario analysis results)-State CO2 emission reduction targets-Apply scenario analysis across the company-Set CO2 emission reduction targets and renewable energy
targets for each division-Formulate portfolios based on multiple scenarios(medium-term management plan)-Formulate future business that contribute tomaintaining and expanding revenue based onsustainability (medium-term management plan)-Announce a business policy that includes measures toaddress climate change as part of medium-term
management plan

>Make approaches toward the government with the aim of securing a position for each business in the 1.5ºC scenario-In the case of the bus business, clarify details of EV buses profitability assessment and lobby the government, etc.
Others>Build partnerships with the aim of creating a market in the 1.5ºC scenario-In the case of the bus business, form alliances, etc., with other companies, etc., aimed at introducing EV buses
3-66Materials
Practice Case
Practice Case
Practice Case
Practice Case
Practice CaseGUNZE LIMITED
Shin-Etsu Chemical Co., Ltd.
Nippon Paper Industries Co., Ltd.
Mitsui Mining & Smelting Co., Ltd.
UACJ Corporation

3-67

Covered businessSelection of businesses covered in this project

portfolio, will be covered
Business portfolio
3

Lifestyle Creations
10.6%
1
Total 140.3
billion JPY*1
40.0%

Net sales of
FY2019Innerwear
37.6 billion JPY

Apparel

49.4%

Total 69.49
billion JPY
Net sales of
FY2019Legwear,House Casual Wear,
Threads & Accessories

2 Functional Solutions
Covered sector and discussed risks Example
Sector

Sector

1
Apparelbusiness

3-68

Innerwear

Risk items
Transition risks
PolicyCarbon price, other regulations Water
Plastic etc.
MarketChanges in price, Increase in raw materials
Technologies
Development of low-carbon technologies
Reputation
Changes in customer behaviors, Changes inPhysical risks
Chronic
Increase in average temperature, Changes inweather patterns
Acute
Extreme weather conditions

Significance assessment of risks/opportunities Step
Apparel industry risk and opportunity items in processes spanning raw materials manufacturing to sales
Transition risk
item
Small
classification

Business Impact
Index

Asse
ssme
nt

Discussion: Risks

Discussion: Opportunities

Carbonemissiontargets/policies Spendingof each country
Carbon tax

Plant operating costs may increase due to the applicationof carbon taxes by governments of various countries

Quick responses such as shifting to use low-carbon energy
could make it possible to limit energy cost increases

Carbonemission
Spending
targets/policies
of each country

Production costs may rise due to rising costs of raw
materials

Quick responses to anticipated future regulations could makeLarge
it possible to limit production cost increases

Changes in the
Spending
energy mix

Electricity fees may rise and manufacturing costs may
increase due to higher rates of reusable energy
Costs may increase due to significant reductions in CO2emissions for manufacturing plants

Expanding investment and increasing the use ofrenewable energy may lead to greater revenue fromenhanced production capability

Large

Large

Changes in
Revenueimportant
Spending
products/prices

Production costs of key products may rise due torequirements to display the carbon footprint of
manufactured products, including in the textile industry

Options may increase for new materials, new products, andnew services adapted to a circular economy, resulting inLarge
increased sales

Changes incustomer
behavior

Revenue
Spending

As more consumers and stakeholders make purchasing
decisions based on environmental impact, delayed action
may lead to loss of customers and decreased sales
There is a risk of increased costs for presentation of risks
such as use of hazardous substances and supply chain risks

By responding to changes in purchasing trends andexpanding its line of environmentally friendly products,
such as functional clothing that uses less energy andLarge
products utilizing recycled materials, GUNZE can maintainits market superiority and connect these to increased
revenue

Changes ininvestor's
reputation

Revenuesetting for energy, water, and material use may lead toincreased costs for addressing potential reputation damage
and decreased sales

Meeting sustainability requirements could lead to deeper
relationships with customers, employees, regulators, andinterest groups, which could lead to increased revenue

Medi
um

3-69

Significance assessment of risks/opportunities Step
Apparel industry risk and opportunity items in processes spanning raw materials manufacturing to sales
Physical risk item
Smallclassification

Business Impact
Index

Discussion: Risks

Changes inrainfall andweather patterns

Revenue
Spending

There is a risk that rising temperatures will affect raw
material yields, resulting in lower production anddecreased revenue
Costs are incurred for enhancing the cooling capacity inproduction processes, etc.

By developing and selling functional products that
address climate change, GUNZE can differentiate
ourselves from competitors and connect this with increased
Large
sales
Strengthening initiatives toward energy conservation will
reduce greenhouse gas emissions, leading to reduced costs

Rising sea level

Revenue
Spending

There is a chance that areas bordering or near the coast may
carry a risk of disruptions in employee attendance or in theentire supply chain, thereby increasing costs

Establishing a network that ensures operations acrossmultiple locations could reduce operational failures andprevent decreases in revenue

Mediu
m

Water Stress(Drought)

Revenue
Spending

There is a chance that access to critical freshwater will bethreatened for farms providing materials for products,
resulting in decreased revenue due to lower production
Raw material prices may rise due to rising water prices,
resulting in increased production costs

Working to reduce the environmental impact in the
supply chain and mitigating water access risks will enablestable production and reduced costs over the long term

Large

Revenue
Spending

There is a risk that sales will decrease if business activities
stop or shrink due to typhoons, flooding, or other extreme
weather conditions
There may be increased input costs for materials such as
cotton and for polyester and other petroleum-relatedmaterials due to flooding and other climate change-related
eventsEstablishing disaster prevention sites and strengthening
the supply chain in terms of products and logistics will
Large
enable GUNZE not only to minimize damage, but also todemonstrate its business continuity capability, leading to
reduced costs

Revenue

The production of raw materials such as cotton may beaffected, leading to lower production and decreased sales

Increasing
severity of
extreme weather
conditions
Flood

Increasing
severity of
extreme weather
conditions
Heavy rains,storms andcyclones
3-70

Discussion: Opportunities

Asse
ssme
nt

Initiatives such as those for improving corporate image
through the provision of emergency relief supplies could
Largevalue in terms of finances, branding, etc., leading toincreased revenue

Step

Scenario group definition

Selected scenarios
1.5 4 scenario as of 2050 have been assumed for this project in consideration of conducting a wide
range of scenario analysis with a view to carbon neutrality in 2050

Projected average global surface temperature change
compared with the average from 1986 2005

4

Definition of
4
2.7
scenarios
scenario

3.2 5.4 higher than pre-industrial
Revolution levels if no additional measuresagainst global warming are taken

Over 22.7

4

scenario

2.7 4.0 higher than pre-industrial
Revolution levels if no additional measuresagainst global warming are taken

2

scenario

0.9 2.3 higher than pre-industrial
Revolution levels if strict measures are taken

Reference 1.5
Almost the same temperature changes would occur in the
2 and 4 scenarios in the 2030
It is important to draw an appropriate transition pathfocusing on decarbonization by 2050 for each timeframe
selected in the scenario analysis
3-71

Sources AR5 SYR SPM.6

scenario

We are highly likely to achieve an increase ofless than 1.5 compared to pre-industrial
Revolution levels if a radical transition to a
new system is madeThe TCFD recommendations for scenario analysis
suggest that multiple temperature range scenarios
be selected, including those below 2

Global Warming of 1.5

IPCC

Identify and define range of scenarios

Step

Physical risks will become manifest, and raw material prices and product manufacturing are expected to be impacted
4

1.5

Sellers(Raw materials)
Plastic production amounts
increase, and use of recycledplastic is not promoted, resulting
in lower raw material prices
Crude oil prices rise or remain
flat, and prices of raw materials
derived from crude oil increase
Raw material prices fluctuate due
to slight increases in cotton
production amounts
Raw material prices soar due tothe impact of extreme weather
on raw material production
areas
Measures are needed for plants
and resource suppliers with ahigh risk of drought andextreme weather

4

worldview @2050s (Example)
New entrants(Energy)
The spread of renewableenergy continues on its
current course, andelectricity prices fall slightly

3-72(Customers/retailers)Strengthening
development andsales of functional
products

Industries(Transition risks)
Product manufacturing costs andprocurement costs increase due toincreased raw material prices
Operating costs decrease due tofalling electricity prices as a result of
renewable energy / energy conservation
measures remaining the same as current
ones (slight increase for China)(Physical risks)
Changing of raw material
suppliers, review of
portfolios related to theuse of each raw material

BuyersEntry into competition by companies that developfunctional underwear products (cooling, UV
protection, etc.) which address rising averagetemperatures

Demand for functional
underwear increases due torising average temperatures andan increased number ofextremely hot days in summer
Demand for thermal underwear
decreases due to rising averagetemperatures and warmer winters
Increased demand for allseasons products with longwear periods that are lessaffected by temperature

No special measures needed: Actions for seizing opportunities

Government
Renewable energy policies do
not progress due to weakening
external pressure from theinternational community as lowcarbon/decarbonization trends
weaken
A carbon tax is not introduced
Regulations concerning theuse of recycled plastics are
not introduced
Subsidies are established due
to increases in extreme
weather and water stress

Demand toward ethicalconsumption continues on its
current course, and there is no
significant change
There is increased need toensure stable logistics andproduct supply during disasters
caused by extreme weather

Costs for addressing flooding at plants
increase
Costs increase for responding to
shutdowns and logistics delays
caused by extreme weather at
Establishment of a logistics network
manufacturing plants and sales outlets
for times of disaster, introduction of
BCP measures such as battery
storage(Substitute products): Actions for addressing risks

Reconsideration of disaster
responses and locations of sites
with high physical risk

Timely acquirement of policy
information

Identify and define range of scenarios

Step

Transition risks increase due to the need to move forward with disclosure and certification addressing the use of new materials
and ethical consumption: Actions for addressing risks
4

1.5

1.5

worldview @2050s (Example)
New entrants

Sellers(Raw materials)

BuyersThere is an increased shift
toward recycled materials.
Procurement and manufacturingcosts increase due to the use ofrecycled plastics, etc.
Crude oil prices drop, andprices of raw materials derived
from crude oil decrease
Raw material prices fluctuate due
to increases in cotton
production amounts
Measures are needed for plants
and resource suppliers with ahigh risk of drought andextreme weather (less than in
the 4ºC scenario)

Industries
Costs increase due to increased recycledmaterials prices. There is increased R&D
activity related to recycled materials
Industry costs increase for addressing
traceability and addressing ethicalconsumption
There are increased operating costs due torenewable energy use and promotion ofelectrification at plants
Promotion of a build-to-order production
systemUse of renewable energy
increases, and electricity
prices fall
Introduction of a carbon tax
increases the burden ofelectricity expenses andmanufacturing expenses, andprocurement costs rise
Securing a power supply for
self-consumption, investment
in renewable energy(Substitute products)
No special measures needed

Regulations are introduced
related to the use of recycledplastic (usage rate settings,
environmentally friendly
design)Demand for all-seasonsproducts increases slightly
Demand toward disclosure andcertified products addressing
ethical consumption increases,
and sales for related products
increase. Meanwhile, sales for
products that do no addressthese decrease

Timely acquirement of policy
information
Collaborative measures withthe government towardmaterial-related regulations

Recycling policies increase theneed (especially in retailers) for
products made from recycledmaterials and products thatcan be recycled(Physical risks)
Costs for addressing flooding at plants
increase slightly
Costs increase slightly for responding to
shutdowns and logistics delays causedby extreme weather at manufacturing
plants and sales outlets

A carbon tax is introduced.
Plants and other facilities withhigh carbon emissions are
subject to regulations

Demand for thermal underwear
deceases slightly due to rising
average temperatures andwarmer winters(Transition risks)(Energy)

Measures for renewable energy
promotion and electrification
are implemented with the aim ofachieving CO2 reduction targets.
Subsidies are improved

Demand for functional
underwear increases slightly
due to rising averagetemperatures and an increased
number of extremely hot days insummerpartnerships(Alliances, M&A)

R&D related to use ofrecycled materials

Government(Customers/retailers)

Entry into competition by companies that use
alternate materials (cellulose, biomaterials,
recycled materials)
Entry into competition by companies that address
disclosure and certification related to carbon
footprints and traceability
Strengthening of: Actions for seizing opportunities

Strengthening disclosure of
ethical consumption measuresand acquirement of certification
R&D related to recycling and theuse of recycled materials

3-73

Identify and define range of scenarios

Step[View of a future society in the 4ºC scenario]

4

Physical risks such as extreme weather and rising temperatures become manifest,
and recycling policies proceed along the present course
Raw material manufacturing

Transport
ation

Product manufacturing
CO2

CO2

CO2
CO2

Finished productmanufacturing

Transport
ation

1.5

Sales/use- A carbon tax is not introduced, useof renewable energy does not spread,and electricity fees drop
- Increased introduction of battery
storage, etc., in disaster response
BCPs

DisposalSales

Raw material
manufacturing
CO2©GUNZE

Supply chain disruptions
caused by extreme weather©GUNZE

Recycling policies proceedalong the present course©GUNZE

Reuse
Development offunctional products(cooling, UV protection,
etc.)

Plastic production amounts
increase.
Crude oil prices rise

- Increased damage in plants from agreater number of extreme weather
events- Cotton production amounts increaseslightly due to rising averagetemperatures(Carbon tax not introduced)
Increased disaster-related subsidies

Government
3-74- Increased demand for functional products that
address rising temperatures- Decreased demand for thermal underwear due torising average temperatures and warmer winters- Increased demand for all-seasons products withlong wear periods that are less affected bytemperature

Plastic regulations, energy
conservation / renewableenergy initiatives are notactively promoted

Identify and define range of scenarios

Step[View of a future society in the 1.5ºC scenario]

4

Carbon tax and recycled plastic regulations are introduced, and ethical consumption increases
Transportation

Raw material manufacturing

Transport
ation

Product manufacturing
CO2

Sales/use- Introduction of a carbon tax,
introduction of a carbon borderadjustment mechanism- Rising plant operating cost/transportation
costs due to rising electricity fees

CO2

1.5

Disposal

CO2

Finished productmanufacturing

Raw material
manufacturing

Sales

Recycling policies progress,
resulting in increased
demand for recyclable
products

Certification tag©GUNZE

CO2

CO2Visualization of supply
chain decarbonization©GUNZEReuse

CO2©GUNZE

Increased activity for R&D and use ofreused materials and new materials(cellulose, biomaterials, recycledmaterials

Plastic usage
regulations and falling
crude oil prices- Slightly increased damage inplants from a greater number ofextreme weather events- Cotton production amounts increase
due to rising averagetemperatures

Introduction of a carbon
tax, demand for GHG
gas reductions

Introduction ofregulations related to theuse of recycled plastics- Slightly increased demand forfunctional products that address risingtemperatures- Slightly decreased demand for thermal
underwear due to trends toward warmer
winters- Slightly increased demand for allseasons products

Certification tag

Increased demand for disclosureand certified products due toincreased ethical consumption

Government
3-75

Evaluate business impacts

Step[List of parameters used]

Definition of each of the worldviews based on scientific evidence, etc., from IEA and other sources
2050

At present

4(2

or above)Japan$250/t-CO2
China$200/t-CO2
Thailand Vietnam $55/t-CO2(1) Carbon priceTransition risks
Cost increase(2) Carbon emission
targets/policies for eachcountry: Plastic reusage rates(3) Changes in the energy
mix: Electricity prices(4) Changes in the energymix: Crude oil prices

100%Japan $216/MWh
China $86/MWh

Japan $176/MWh
China $118/MWh

Transitio
Physical risks
n risks
Profit increase
Profitdecreasedecrease
Physical risks
Cost increase

3-76(9) Increased occurrence of
extreme weather: Drought(7) Rising temperatures: Cotton production$154 billion ($billion)(Commodity balance
production, 2012)(8) Rising temperatures: Underwear sales pattern(10) Increased occurrence of
extreme weather: Flooding

SourceIEA NZE2050
4 scenario is assumed tobe the same as the current
level
EU Technical Expert Group(TEG) "Taxonomy Report:
Technical Annex"

Japan $235/MWh
China $131/MWh

IEA WEO2018

GlobalOil prices: $24/barrel

IEA WEO2020 NZE2050
Agency for Natural
Resources and Energy
Energy$222 billion ($billion)(Commodity balance
production)$235 billion($billion)(Commodity balance
production)

FAO The future of foodand agriculture Alternative
pathways to 2050

Average +2.04

Average +1.15

World Bank Climate
Change Knowledge
PortalGlobalGlobalOil prices(1.5 ): $37/barrel
Oil prices: $96/barrel(5) Changes in key products Oil prices(4 ): $63/barrel/ finished product prices: Raw material prices(6) Changes in customer
behavior: Ethical consumption

1.5

Estimated from WRI
Water Risk

1x

4x

2x

Step

Evaluate business impacts

In Japan, financial impact from risks such as carbon tax, regulations on recycled plastics, and the affect ofrising crude oil prices on raw material prices is expected to be significant
Risk item

Country

Overall(1) Carbon priceA

1.5

1.5ºC: There will be significant impact from carbon taxes, and operating costs
will increase
4ºC: We predict that a carbon tax will not be introduced

4

JPY 100 million(2) Carbon emission targets/policies for eachcountry
E: Plastic reusage rates

1.5ºC: Recycled plastic regulations are introduced, and costs increase
4ºC: We predict that recycled plastic regulations will not be introduced

JPY 100 million(3) Changes in the energy mix: Electricity prices

B

1.5ºC: Electricity unit prices rise due to an increased renewable energy ratio,
and manufacturing costs increase
4ºC: Electricity unit prices fall, and manufacturing costs decrease

JPY 100 million

JPY 100 million(4) Changes in the energy mix: Crude oil prices

C

Crude oil prices change, and fluctuations occur in CO2 emissions andmanufacturing costs

JPY 100 million

JPY 100 million(5) Changes in key products / finishedproduct prices: Raw material prices

D

1.5ºC: Manufacturing costs for synthetic fibers derived from crude oil decrease
4ºC: Manufacturing costs for synthetic fibers derived from crude oil increase

JPY 100 million

JPY 100 million(6) Changes in customer behavior: Ethical consumption

F

1.5ºC: Interest in ethical products increases
4ºC: We predict that there will be no change compared to the current situation

JPY 100 million(7) Rising temperatures: Cotton production

H

Cotton prices increase due to the relationship between increased production
and price elasticity

JPY 100 million

JPY 100 million(8) Rising temperatures: Underwear sales pattern (1): Increased summer sales

G

Demand for functional products that address rising temperatures slightly
increases

JPY 100 million

JPY 100 million(8) Rising temperatures: Underwear sales pattern (2): Reduced winter sales

G

Demand for thermal underwear due to trends for warmer winters slightly
decreases

JPY 100 million

JPY 100 million

JPY 100 million

JPY 100 million

JPY 100 million

JPY 100 million(9) Increased occurrence of extreme weather: Drought

Risks vary for each site(10) Increased occurrence of extreme
weather: Flooding

Occurrence will increase to twice the frequency in the 1.5ºC scenario, and fourtimes the frequency in the 4ºC scenario

I

J

3-77

Countermeasure definition

Step

We have selected companies based on the similarity of business activities andactivities related to the environment and organized their statuses into a list

Item

A

E

Carbon tax(Reduction targets)
Carbon emission
targets/policies foreach country(Energy efficiency
Renewable energy
Plastic reusage
regulations)

B
Changes in energy
C mix(Fuel and electricity
prices)D Changes in important
products/prices
H (Raw material prices)F

Changes in customer
behavior

G Increase in averagetemperature

I
J
3-78

Increasing severityof extreme weather
conditions(Drought Flood)

Financial impact
1.5

JPY 100 million

4(no carbon tax)

1.5

JPY 100 million

4(no regulations)

1.5

JPY 100 million

4

JPY 100 million

1.5

JPY 100 million

4

JPY 100 million

1.5

JPY 100 million

4(no changes)

1.5

JPY 100 million

4

JPY 100 million

1.5

JPY 100 million

4

JPY 100 million

Riskcountermeasures

Opportunity-seizing
measures

Countermeasure example
Reduce CO2 emissions: Reduce emissions to 35% less than 2013 amounts by 2030
Total waste emissions: 12% reduction (Compared to 2012 BM)
Increase the efficiency of utility equipment such as boilers and air conditioners
Conserve energy by implementing high performance insulation and high airtightness in newbuildings
Promote renewable energy sources through the use of CO2-free menus
Reduce electricity consumption by implementing self-consumption through increasing use ofsolar energy and introducing energy storage technology
Transition from fuel oil A to fuels with lower emissions, such as city gas, LPG, and LNG
Reduce electricity prices by promoting electrification instead of gasification
Change over to LED lighting and use equipment with low energy consumption
Reduce energy prices by promoting the use of renewable energy sources (CO2 coefficient ofzero)Transition from petroleum-sourced to natural-sourced materials
Use environmentally friendly raw materials and materials (organic cotton, recycledmaterials, etc.)
Establish an environmental management system that complies with international certification
standards (1SO 14001, etc.)
Develop functional underwear products with perspiration absorption and quick-drying functions

Reduce the washing temperature in textile processing and establish environmentally friendly
dyeing technology to significantly reduce the amount of water used