Mitigating and Adapting to Climate Change (Disclosure based on TCFD Recommendations)
The Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) states that “it is unequivocal that human influence has warmed the atmosphere, ocean and land,” and that “widespread and rapid changes in the atmosphere, ocean, cryosphere and biosphere have occurred.” Moreover, a new phase of the Paris Agreement—an international framework—kicked off in 2020. With countries declaring their intentions to achieve net-zero CO2 emissions and carbon neutrality, the movement driving societyʼs transition to a decarbonized society is gaining momentum, which certainly indicates that the initiatives of individual companies to reduce greenhouse gases are growing increasingly important.
The Kubota Group sees “Mitigating and Adapting to Climate Change” as one of its materiality and is committed to the challenge of achieving carbon neutrality by 2050. It has been advancing initiatives toward the “mitigation” of climate change by reducing greenhouse gas emissions mainly through energy-saving activities and the introduction of renewable energy sources and “adaptation” to be prepared for the impact of climate change.
- Activities towards achieving SDGs
- Long-Term Environmental Conservation Targets 2030 and the Results
- Medium-Term Environmental Conservation Targets 2025 and the Results
- Mitigation of Climate Change
- Adaptation to Climate Change
- Disclosure in Accordance with the TCFD Recommendations
Activities towards achieving SDGs
Related SDGs and targets | |
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Major Activity Content |
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2030/2025 Activity Targets (KPIs) |
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Long-Term Environmental Conservation Targets 2030 and the Results
2030 Targets | Reduce CO2 emissions from the Kubota Group* by 50% compared to the base year 2014. |
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Result | In FY2022, CO2 emissions of the Kubota Group* were reduced by 23.6% compared to the base year 2014. |
- CO2 emissions refer to Scope 1 and 2 emissions from all Kubota Group sites (100%) and include greenhouse gases from non-energy sources
Revision of Targets (2022)
Before revision | After revision | |
Target sites | Group sites in Japan | Global group sites |
Target value | 30% reduction | 50% reduction |
Base FY | 2014 | 2014 |
Target CO2 emissions volume |
Scopes 1, 2 534 kilotons CO2e |
Scopes 1, 2 778 kilotons CO2e |
Coverage ratio | 68.6% | 100% |
Medium-Term Environmental Conservation Targets 2025 and the Results
Actions items | Management Indicators*2 | Base FY | Targets for FY2025*4 | NEw Targets FY2030*4 | FY2022 Results | |
---|---|---|---|---|---|---|
Old | New | |||||
Reduce CO2*1 | CO2 emissions per unit of production (Scopes 1, 2) | 2014 | ▲25% | ▲45% | ▲60% | ▲38.9% |
Ratio of renewable energy usage*3 | — | 1% or more | 20% or more | 60% or more | 8.3% | |
Save energy | Energy consumption per unit of production | 2014 | ▲18% | ▲35% | ▲40% | ▲32.5% |
- *1.CO2 emissions indicate 90.6% of base-year Scope 1 and 2 emissions and include greenhouse gases from non-energy sources. We use the emissions coefficient for electric power of the base year in our calculation of CO2 emissions from energy sources.
- *2.The figures per unit of production represent the intensity of the environmental load per unit of money amount of production. The exchange rate for FY2014 is used when translating the money amount of production of overseas sites into Japanese yen.
- *3.The applicable boundary is global sites.
- *4.▲ indicates a negative figure.
Mitigation of Climate Change
1.CO2 Emissions (Scope 1 and Scope 2)
In FY2022, CO2 emissions were 585 kilotons CO2e, a decrease of 4.4% compared to the previous year. On the other hand, CO2 emissions per unit of sales improved by 21.6% compared to the previous year.
Despite an increase in machinery production sites overseas, mainly as a result of the acquisition of Escorts Kubota Ltd., CO2 emissions decreased due to the increased use of renewable energy, a drop in production at cast iron production sites, and an improvement in the emissions coefficient for electricity consumption. Emissions per unit of sales improved as a result of not only an increase in consolidated net sales, but efforts to lower CO2 emissions by promoting reduction measures, such as switching fuels, promoting ways to save energy, and the installation of energy-efficient equipment.
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Trends in CO2 Emissions*1 and Emissions Per Unit of Sales
- *1.The CO2 emissions for companies acquired or sold that have a significant impact on the Group's overall CO2 emissions have been retroactively adjusted to before the acquisition or sale. The adjusted values are: 778 kilotons CO2e in FY2014, 739 kilotons CO2e in FY2015, 700 kilotons CO2e in FY2016, 688 kilotons CO2e in FY2017,693 kilotons CO2e in FY2018, 672 kilotons CO2e in FY2019, 614 kilotons CO2e in FY2020, 660 kilotons CO2e in FY2021, and 595 kilotons CO2e in FY2022.
- *2.CO2 emissions (585 kilotons CO2e) include portions of CO2 that were not released into the atmosphere but absorbed as carbon into products such as iron pipe (15 kilotons CO2e).
- *3.Increase from fossil fuels due to FY2022 acquisition of overseas companies (38 kilotons CO2e)
- *4.CO2 emissions refer to Scope 1 and 2 emissions from all Kubota Group sites (100%) and include greenhouse gases from non-energy sources.
- *5.CO2 emissions per unit of consolidated net sales. The Kubota Group adopted International Financial Reporting Standards (IFRS) instead of accounting principles generally accepted in the United States of America from FY2018.
2. Measures to Reduce CO2 Emissions
The Kubota Group has established the Medium- and Long-Term Environmental Conservation Targets and is devoting efforts to reducing CO2 emissions and energy use associated with its business activities.
We have also established medium-term reduction measure implementation plans, which are reviewed every year by each production site. When we review the plans, we have introduced Internal Carbon Pricing* to calculate their effect on reducing CO2 emissions and energy consumption, as well as the investment cost for the amount of CO2 reduced, in the capital expenditure plans. The effectiveness and economical rationality of each project are identified from an environmental standpoint and used as information for making investment decisions.
We have implemented some of the specific reduction measures that include eliminating loss in energy consumption through a switch to equipment with higher energy efficiency and proper operation management, and promoting the visualization of power consumption in each process. At the same time, we have expanded the use of LED lighting at all our global sites—as of end-FY2022 the ratio of LEDs as a percentage of all lights at production sites had increased to 79.8%. In FY2022, we worked on energy saving measures for compressed air as well.
We are also accelerating the introduction of renewable energy. In FY2022, new solar power generation systems came online at the Kubota Global Institute of Technology (Japan), Kubota Seiki Co., Ltd. (Japan), and Kubota Precision Machinery (Thailand) Co., Ltd. This brought the renewable energy consumption of the entire Group to 68,183 MWh (roughly equivalent to a 41,831-ton reduction in CO2 emissions). We have raised the FY2025 target for the ratio of renewable energy usage to 25% or more. The result in FY2022 was 8.3% .
As a result of the efforts toward achieving the Medium-Term Environmental Conservation Targets 2025 for CO2 reduction, global production sites achieved a reduction of 7.1 kilotons CO2e in FY2022 compared with the case where countermeasures were not implemented from the previous year. The economic effects of these measures reached 180 million yen compared to the previous year. CO2 emissions per unit of production in FY2022 improved by 38.9% compared to the base year (FY2014).
We will continue to implement measures to save energy on production equipment and air-conditioning/lighting, as well as promote measures to reduce waste and loss in the use of energy based on the concept of the Kubota Production System (KPS) and expand the use of renewable energy.
- Refers to the placing of an internal monetary value on carbon by an organization
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CO2 Emissions by Region
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CO2 Emissions by Business
- *1.CO2 emissions generated from the production of products such as agricultural machinery, construction machinery, and engines.
- *2.CO2 emissions generated from the production of products such as ductile iron pipes and cast steel.
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CO2 Emissions by Emission Source
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Japan
-
Overseas
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- *1. Greenhouse gases from non-energy sources include the following: CO2 4.3 kilotons CO2e, CH4 0.9 kilotons CO2e, N2O 0.4 kilotons CO2e, HFC 1.3 kilotons CO2e, PFC 0 kilotons CO2e, SF6 0.02 kilotons CO2e, and NF3 0 kilotons CO2e
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Trends in Energy Use at Business Sites and Energy Use per Unit of Sales
- *1.PJ=1015J, TJ=1012J
- *2.Increase from fossil fuels due to FY2022 acquisition of overseas companies (0.6PJ)
- *3.Energy use per unit of consolidated net sales. The Kubota Group adopted International Financial Reporting Standards (IFRS) instead of accounting principles generally accepted in the United States of America from FY2018.
3. CO2 Emissions throughout the Value Chain
The Kubota Group makes concerted efforts to figure out CO2 emissions throughout the value chain in addition to its business sites. Following guidelines*, we calculate CO2 emissions based on Scope 3, and continue to expand the categories in the Scope of its calculation of CO2 emissions.
- Basic Guidelines on Accounting for Greenhouse Gas Emissions Throughout the Supply Chain issued by the Japanese Ministry of the Environment and Ministry of Economy, Trade and Industry
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CO2 Emissions in Each Stage of Value Chain Classification Scope of calculation CO2 emissions (kilotons CO2e)*4 2020 2021 2022 Emissions of
the Kubota
Group's
business sitesDirect emissions
(Scope 1)*1Use of fossil fuels 285 303 295 Non-energy-derived greenhouse gas emissions 6 6 7 Indirect emissions
(Scope 2)*1Purchased electricity and heat use 279 304 283 Upstream and
Downstream
emissionsOther indirect
emissions
(Scope 3)Category 1 Resource extraction, manufacturing and transportation related to purchased goods/services*2*3 3,046 3,732 4,104 2 Manufacturing and transportation of capital goods such as purchased equipment 292 406 567 3 Resource extraction, manufacturing and transportation related to purchased fuels/energy 105 112 111 4 Upstream transportation and distribution 199 285 282 5 Disposal of wastes discharged from business sites 28 31 31 6 Employee business travels 11 11 19 7 Employee commuting 10 10 10 8 Operation of assets leased to the Kubota Group Not applicable*5 Not applicable*5 Not applicable*5 9 Downstream transportation and distribution 0 0 0 10 Processing of intermediate products 90 117 141 11 Use of sold products*2*3 21,957 28,409 37,156 12 End-of-life treatment of sold products*2*3 49 61 68 13 Operation of assets leased to other entities Not applicable*5 Not applicable*5 Not applicable*5 14 Operation of franchises Not applicable*5 Not applicable*5 Not applicable*5 15 Investments Not applicable*5 Not applicable*5 Not applicable*5 Total of Scope 3 25,787 33,174 42,489 Total of Scopes 1, 2, and 3 26,357 33,787 43,074 - *1.CO2 emissions refers to emissions from all Kubota Group sites (100%).
- *2.From FY2022 the scope of products subject to calculations was changed. This change has been retroactively applied to prior years.
- *3.CO2 emissions per unit of sales for each product have been adjusted in order to improve accuracy. This change has been retroactively applied to prior years.
- *4.Totals shown may differ from the simple sum of values shown due to rounding.
- *5.CO2 emissions shown as “not applicable” correspond to zero.
Adaptation to Climate Change
1. Measures to Adapt to Climate Change
It is likely that the progression of climate change will have a negative impact on our lives. For example, the frequent occurrence of weather disasters, changes in agricultural practices, and an increase in the number of heat stroke cases. Our response to climate change needs to include ongoing measures aimed at reducing greenhouse gas emissions, as well as policies for avoiding or reducing damage brought on by climate change.
As part of its strategy to adapt to climate change, the Kubota Group is implementing a number of initiatives at its business sites and in its products and services.
Category | Major initiatives |
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Food |
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Water | Flooding |
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Drought |
|
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Management systems |
|
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Living environment |
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Provision of Farm Water Management System WATARAS
WATARAS is a farm water management system that allows users to remotely and automatically control water flowing in and out of rice paddies while monitoring water levels on a smartphone or PC.
So-called “smart rice paddy dam” demonstrations are underway in which rice paddies are temporarily made to fill up with rainwater by remotely raising the drainage level setting when rivers are at risk of flooding during heavy rainfall. These “rice paddy dams” have the potential to help prevent flooding.
■ Initiatives taken at Business Sites
Typhoons and pouring rain can affect production equipment and distribution. We have formulated BCP measures and disaster response manuals and we continue to take steps to prevent any holdups or delays in business activity even during weather disasters. Alongside seismic retrofitting, our BCP measures include steps taken to minimize the impact of torrential downpours on buildings and the protection of power supply equipment from flooding. To be prepared for high tides and torrential rain, the sites have also installed sump pumps, hold emergency drills, and are equipped with water tanks for use during water shortages.
Disclosure in Accordance with the TCFD Recommendations
The Kubota Group expressed its support for the TCFD* recommendations in January 2020.
- The Task Force on Climate-related Financial Disclosures established
by the Financial Stability Board (FSB).
1. TCFD Recommendations
The various risks and opportunities arising from climate change could have a significant impact on companies' financial statuses. The TCFD recommendations released in 2017 present a framework for corporations to disclose climate-related information to the financial markets. They recommend disclosure of information about the status of the company's response to climate change, which could have a damaging effect on stabilization of financial systems, and about the impact on business and so forth. The recommendations call for companies to autonomously ascertain and disclose information related to Governance, Strategy, Risk Management, and Metrics and Targets, such as the financial impact of risks and opportunities engendered by climate change and the status of the company's response. Also, the TCFD recommendations were partially revised in October 2021 to the effect that companies committed to reducing greenhouse gas emissions are now required to explain their plans for transitioning to a low-carbon economy. The Kubota Group will continue to examine how we can tackle climate change and make every effort to expand the information it discloses.
The status of the Group's disclosures related to the TCFD recommendations is as follows.Disclosure Items in the TCFD Recommendations | Relevant Section | Kubota Group ESG Report 2023 Page |
---|---|---|
Governance | ||
a. Describe the board's oversight of climate-related risks and opportunities. | Environmental Management Promotion System, | P34 |
Corporate Governance Structure | P153 | |
b. Describe management's role in assessing and managing risks and opportunities. | Environmental Management Promotion System, | P34 |
Remuneration | P160 | |
Strategy | ||
a. Describe the climate-related risks and opportunities the organization has identifi ed over the short, medium, and long term. | Environmental Management Approach —Materiality in Environmental Management, |
P19 |
Environmental Management Approach —Risks and Opportunities |
P20 | |
b. Describe the impact of climate-related risks and opportunities on the organization's businesses, strategy, and fi nancial planning. | Environmental Management Approach —Risks and Opportunities |
P20 |
Environmental Management Approach —Key Measures |
P21 | |
c. Describe the resilience of the organization's strategy, taking into consideration different climate-related scenarios, including a 2℃ or lower scenario. | Environmental Vision | P22 |
Mitigating and Adapting to Climate Change | P36 | |
Expanding Environment-friendly Products and Services | P66 | |
Risk Management | ||
a. Describe the organization's processes for identifying and assessing climate-related risks. | Environmental Management Approach —Materiality in Environmental Management |
P19 |
b. Describe the organization's processes for managing climate-related risks. | Environmental Management Approach —Materiality in Environmental Management |
P19 |
Environmental Management Promotion System | P34 | |
Expanding Environment-friendly Products and Services | P66 | |
Internal Control—Internal Control System | P166 | |
Internal Control—Internal Control System Operation Activities (Risk Management Activities) | P166 | |
c. Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization's overall risk management. | Environmental Management Promotion System | P34 |
Corporate Governance Structure | P153 | |
Internal Control—Internal Control System | P166 | |
Metrics and Targets | ||
a. Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process. | Medium- and Long-Term Environmental Conservation Targets and Results | P28 |
Mitigating and Adapting to Climate Change —Measures to Reduce Emissions, |
P36 | |
Remuneration | P160 | |
b. Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks. | Mitigating and Adapting to Climate Change—CO2 Emissions throughout the Value Chain | P39 |
Environmental Data | P82 | |
c. Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets. | Medium- and Long-Term Environmental Conservation Targets and Results | P28 |
2. Governance
In 2014 the Kubota Group established the Environmental Management Strategy Committee to deliberate on medium- and long-term targets and key measures relating to environmental conservation, as well as an environmental vision, in light of climate change and other global environmental problems and the Group's business environment. In 2021, with the objective of realizing a style of ESG management unique to Kubota, that committee was renamed the ESG Management Strategy Meeting to engage in discussion of ESG-related issues on a Group-wide basis. In addition, Environmental Manager Conferences are held in each of five regions—Japan, China, Asia, North America, and Europe—topromote environmental management of the entire Group globally.
The ESG Management Strategy Meeting is chaired by the environmental plants president & representative director and attended by all inside directors, directors in charge of business divisions, the director in charge of finance, the director in charge of human resources, the director in charge of R&D, the director in charge of manufacturing, the director in charge of environmental management, and the general manager of the Corporate Planning & Control Department. The meetings discuss the Group's environmental management, such as medium- and long-term targets and key measures in light of global environmental issues such as climate change and the business environment. They determine priority items and plans that should be carried out in order to reduce environmental loads and risks, and to enhance the lineup of environment-friendly products. The results of the meetings are reported to the Board of ESG Management Strategy Meeting Directors and the Executive Officers' Meeting, and are distributed throughout the Group. It also promotes management based on the plan-do-check-action (PDCA) cycle by assessing and analyzing the progress of the entire Group's environmental conservation activities and reflecting the results when formulating new plans and policies. The ESG Management Strategy Meeting was convened four times in FY2022 to discuss environmental issues.
At the Environmental Manager Conferences, the Kubota Group policy and promotion items are communicated and the status of progress on medium-term environmental conservation targets is shared, along with case studies of energy-conservation measures, environmental risk countermeasures, and so forth. The conferences discuss matters such as how to solve issues related to environmental conservation activities in each region.
Moreover, the Group has set out environmental conservation targets taking medium-term (five-year activity period) and long-term (15-year activity period) perspectives, based on social trends and regulations in each country related to the environmental issues. Medium-term environmental conservation targets are revised every five years. Medium-term plans are made individually by each site for global production sites. The Environmental Protection Department checks the status of progress on targets twice a year. In the same way, medium- to long-term targets for the sales ratio of products certified as Eco-Products are set and the department checks the status of progress once a year. The details and progress of the plans are also reported to the Executive Officers' Meeting.
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Environmental Management Promotion System
- Sites engaged in the business of operation or maintenance of environmental plants
■ Initiatives to Date
Since announcing our support of the TCFD recommendations, we have discussed the items in the chart to the right related to tackling climate change within the framework of our corporate governance structure. We will continue to ramp up our climate change ini t iat i ves a s we push ahead wi th environmental management on a global scale.
2020 | 2021 | 2022 | 2023 |
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|
|
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3. Strategy
In 2021, the Group formulated the Environmental Vision, which presents the direction for its business activities from an environmental perspective towards 2050, having made an analysis of future society based on the scenarios for 1.5°C/2°C and 4°C temperature rises by the Intergovernmental Panel on Climate Change (IPCC), the International Energy Agency (IEA), and others. The Environmental Vision not only lays down the challenge of achieving zero environmental impacts through efforts aimed at reducing CO2 emissions at our production sites, but also represents our commitment to help solve various social issues in the fields of food, water, and the environment through the provision of environmentally friendly products and solutions and to help bring about a carbon-neutral and resilient society. In order to achieve the Environmental Vision, we need to take into account how our business activities are impacted by regulatory developments, technological advancements, and changes in the market. We also need to focus on the physical changes brought on by the acceleration of climate change. That is why we analyzed and evaluated the impacts of climate change on our business domains in light of the anticipated future changes in the market and business environment with the use of 1.5°C/2°C and 4°C scenarios.
Going forward, we will continue to analyze climate change risks and opportunities under each scenario, examine methods for evaluating the foreseeable impacts on business activities as well as the financial impacts of climate change, and strive to provide even greater information disclosure to the public.
(1) Scenario Analysis
The scenario analysis in the TCFD recommendations will be used to examine the financial impact on business due to highly uncertain climate change problems and the impact on future business strategy. In our scenario analysis of the impacts of climate change, we conducted an assessment of the anticipated impacts on business in the year 2030 with the use of the publicly available 1.5°C/2°C and 4°C scenarios of mainly the IPCC and the IEA based on population increase and economic development projections through 2050.
(2) Scenario Analysis Process
Step 1: Selecting target business fields and climate scenario
For the Environmental Vision we formulated in 2021, we projected what society might look like in 2050 and set goals for contributing to the realization of carbon neutrality within that timeframe. Moreover, in order to construct an image of the environmental businesses thought to be necessary in the future, we conducted an analysis of anticipated business lines in the year 2030. The Kubota Group operates businesses in the areas of food, water, and the environment, but of those three fields, in 2021 we analyzed our business operations in food (agricultural machinery) and water, the two fields we expect will be impacted significantly by climate change from both a financial (revenue, etc.) and non-financial point of view. In 2022 we expanded our analyses to include all of our business fields.
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Scenario Analysis Time Horizon
To assess the impacts on our businesses in the year 2030, we selected the 1.5°C/2°C and 4°C scenarios in light of the available scientific evidence.
Item | Assumptions |
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Target businesses | All businesses (Farm & Industrial machinery and Water & Environment) |
Time horizon | Analyzing impacts on business in 2030 taking into account the anticipated changes in around 2050 as a result of climate change |
Setting scenario | Reference scenario | |
---|---|---|
Transition aspect |
1.5°C/2°C scenario | The IEA's Net Zero Emissions by 2050 Scenario (NZE 2050)*1, Sustainable Development Scenario (SDS)*1, 2、 and the FAO's Towards Sustainability Scenario (TSS)*3 |
4°C scenario | The IEA's Stated Policies Scenario (STEPS)*1, 2 The FAO's Business-as-usual Scenario (BAU)*3 |
|
Physical aspect |
1.5°C/2°C/4°C scenario | PCC's Shared Socio-economic Pathway (SSP) scenario*4 |
- *1.Source: IEA “World Energy Outlook 2020”
- *2.Source: IEA “Energy Technology Perspective 2020”
- *3.Source: FAO “The future of food and agriculture – Alternative pathways to 2050”
- *4.Source: IPCC “Sixth Assessment Report”
Step 2: Identifying risks and opportunities
By making best use of publicly available documents and data, we picked out the risks and opportunities expected to have an impact on our businesses and conducted an analysis of what the world might look like in 2030 in relation to our Farm & Industrial machinery and Water & Environment businesses. Much like the decarbonization of the automotive industry, we expect more stringent regulations to be adopted in the Farm & Industrial machinery business in the future and we therefore anticipate that the push for greater diversification of power sources will gain increasing momentum in industrial machinery fields. Given the listing (taxonomy) of sustainable economic activity in Europe and the adoption of restrictions on vehicles with internal combustion engines driving into urban areas, demand for electrification in industrial machinery is expected to increase. This will likely include construction machinery used in works projects and lawnmowers used to maintain public parks. In India, the uptake of natural gas infrastructure is gaining traction and the supply-demand situation for low- and zero-carbon energy currently differs depending on the region. In Japan, the announcement of strategies geared towards sustainable agriculture points to the growing need to curb greenhouse gases derived from agricultural practices. We expect industrial machinery to be used in regions where there is no easy access to charging infrastructure; for example, construction work and farming, where long working hours are a must. We do expect to see the increased use of electric machinery and low- and zero-carbon fuels over the long run, but their uptake for applications in agricultural and construction machinery fields is still unclear. Even though the use of electrified machinery and low- and zero-carbon fuels will have spread to some regions by 2030, we think demand for products that use fossil fuels will still persist. At the same time, we can expect to see demand for next-generation sustainable farming methods and a reduction in greenhouse gases emitted by agricultural machinery designed to operate under such methods. Furthermore, changing weather conditions will likely affect the amount of precipitation and water resources, which in turn will probably transform crop-growing environments, so adapting to these changes will be imperative.
As for the future pertaining to our Water & Environment business, we expect impacts to materialize in procurement, manufacturing, and other parts of the value chain owing to the decarbonization of production methods and a higher carbon tax for iron, a key raw material in many products. We also forecast the greater use of mainly mineral resources owing to population increase and economic development. As awareness of decarbonization and a circular economy grows stronger in society as a whole, we think the recycling movement will gather pace in order to avoid the mining of new resources. We anticipate increased demand for water resources, but there are concerns that water quality will deteriorate mainly because of the salification of groundwater caused by rising sea levels and increased turbidity of rivers stemming from torrential rain. All of this likely means that water resources will have to be managed even more rigorously. In addition, we expect impacts on water for agriculture and domestic use to materialize as a result of heightened water stress in Japan and other parts of Asia, North America, and Europe. Also, torrential rain will likely become more frequent and cause greater damage in the middle latitudes, the tropics, and monsoon regions and we expect this phenomena to have a significantly negative impact on people's lives.
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The World in 2030 with Respect to the Farm & Industrial Machinery Business
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The World in 2030 with Respect to the Water & Environment Business
Step 3: Identification of changes that bear watching
We identified changes in the market and operating environment that bear watching in order to undertake business activities in the future, taking into account the market size and environmental changes brought about by climate change, the importance of businesses and regions impacted, and implications in the value chain.
Step 4: Scenario analysis
For each change that bears watching, we assessed the impacts (risks and opportunities) on business from the perspectives of Farm & Industrial Machinery and Water & Environment businesses and then formulated strategies to deal with those impacts.
(3) Results of Climate Change Scenario Analysis of Each Business Field
Changes considered in Farm & Industrial Machinery Business
Changes considered | Value chain impacts | Scenario | |||
---|---|---|---|---|---|
Procurement | Direct operations | Products | 1.5°C /2°C | 4°C | |
Changes in product design and conditions of use owing mainly to tougher climate change-related regulations | ○ | ○ | ○ | ||
Changes in market needs seeking decarbonized products and services | ○ | ○ | ○ | ||
Changes in mode of agriculture owing to promotion of decarbonization in the industry | ○ | ○ | ○ | ||
Changes in suitable farming land (changes in demand for agricultural machinery and farming methods) | ○ | ○ |
Results of analysis of Farm & Industrial Machinery Business
Scenario | Summary of scenario analysis results (changes in market and operating environment) |
Evaluation results (2030) |
Financial impacts* (2030) |
|
---|---|---|---|---|
1.5°C/ 2°C |
Risks [Technologies] Opportunities [Markets] |
Changes in product design and conditions of use owing mainly to tougher climate change-related regulations
|
|
Medium |
|
Low to medium | |||
Opportunities [Markets] |
Changes in market needs seeking decarbonized products and services
|
|
Low to medium | |
Opportunities [Markets] |
Changes in mode of agriculture owing to promotion of decarbonization
in the industry
|
|
Medium to high | |
4°C | Opportunities [Resilience] |
Changes in suitable farming land (changes in demand for agricultural
machinery and farming methods)
|
|
Medium to high |
Countermeasure strategies | ||||
We intend to contribute to the reduction of CO2 emissions at the product use stage through innovation.
We will look to help lower greenhouse gas emissions from farming and support sustainable food production activity.
|
- Impact on earnings shown as low (less than or equal to ¥2.5bn), medium (greater than ¥2.5bn but less than or equal to ¥25.0bn), or high (greater than ¥25.0bn).
Initiatives helping to fight climate change
Changes considered in the Water & Environment Business
Changes considered | Value chain impacts | Scenario | |||
---|---|---|---|---|---|
Procurement | Direct operations | Products | 1.5°C/2°C | 4°C | |
Changes in decarbonization approach of companies sought after by society | ○ | ○ | ○ | ○ | |
Changes in social trends regarding the securing and conserving of water and resources | ○ | ○ | |||
Changes in society's awareness of weather disasters | ○ | ○ |
Results of analysis of the Water & Environment Business
Scenario | Summary of scenario analysis results (changes in market and operating environment) |
Evaluation results (2030) |
Financial impacts* (2030) |
|
---|---|---|---|---|
1.5°C/ 2°C |
Risks [Regulations & Technology] |
Changes in decarbonization approach of companies sought after by society
|
|
Low |
Opportunities [Markets] |
Changes in social trends regarding the securing and conserving of water and resources
|
|
Medium to high | |
Opportunities [Resource Efficiency] |
Changes in social trends regarding the securing and conserving of water and resources
|
|
Medium to high | |
4°C | Opportunities [Resilience] |
Changes in awareness of weather disasters
|
|
Low to medium |
Countermeasure strategies | ||||
We intend to contribute to the effective use of various resources (water, energy, minerals, etc.).
We intend to contribute to the building of water infrastructure that is resilient to weather disasters.
We will endeavor to reduce the CO2 emissions generated by our business activities.
|
- Impact on earnings shown as low (less than or equal to ¥2.5bn), medium (greater than ¥2.5bn but less than or equal to ¥25.0bn), or high (greater than ¥25.0bn).
Initiatives helping to fight climate change
<Changes considered that apply to all businesses>
Changes considered | Value chain impacts | Scenario | |||
---|---|---|---|---|---|
Procurement | Direct operations | Products | 1.5°C /2°C | 4°C | |
Changes in decarbonization approach of companies sought after by society | ○ | ○ | ○ | ||
Impacts on the Group and suppliers as a result of more abnormal weather events | ○ | ○ | ○ | ○ |
<Analysis results shared by all businesses>
Scenario | Summary of scenario analysis results (changes in market and operating environment) |
Evaluation results (2030) |
Financial impacts*1 (2030) |
|
---|---|---|---|---|
1.5°C / 2°C |
Risks [Regulations] |
Changes in decarbonization approach of companies sought after by society
|
|
Medium |
|
Low (Approx. ¥2.5bn*2) |
|||
4°C | Risks [Physical] |
Impacts on the Group and suppliers as a result of more abnormal weather events
|
|
Medium (Approx. ¥3.0–6.0bn*3) |
|
Medium | |||
Countermeasure strategies | ||||
We intend to contribute to the reduction in CO2 emissions generated by business activities.
We will aim to beef up climate change risk countermeasures at the Group's sites and at suppliers.
|
- *1.Impact on earnings shown as low (less than or equal to ¥2.5bn), medium (greater than ¥2.5bn but less than or equal to ¥25.0bn), or high (greater than ¥25.0bn).
- *2.Calculated by multiplying the projected carbon tax as of 2030.
- *3.Calculated with reference to losses stemming from previous weather disasters.
(4)Transition Plan to a Low-Carbon Economy
By performing climate change scenario analyses, we identified the impacts on our businesses and studied what strategies we can take to deal with those impacts. In particular, we believe climate change will have significant impacts on food production and water resources vital to people's livelihoods. Based on the Kubota Group’s Environmental Vision, we aim to contribute to the establishment of a carbon-neutral and resilient society. We have formulated a transition plan (roadmap) to demonstrate how we intend to solve these issues in society by achieving our vision.
<Disclosure of Transition Plan in line with TCFD recommendations>
Elements considered for the transition plan | Kubota’s circumstances | |
---|---|---|
Governance | Approval, oversight, accountability, reporting, review | Reports and reviews are handled by the ESG Management Strategy Meeting |
Transparency | Progress and new initiatives are reported in mainly integrated reports and ESG reports | |
Incentives | Assessments of efforts to promote ESG are reflected in officer remuneration (see P160 of ESG Report 2023) | |
Assurance | Medium- and long-term environmental conservation targets, energy consumption, and CO2 emissions are subject to third-party assurance | |
Strategy | Alignment | “Mitigating and adapting to climate change” identified as an item of materiality in Kubota’s ESG management policy |
Scenario analysis | Disclosing the results of analyses of 1.5°C/2°C and 4°C temperature increase scenarios and background to our environmental vision | |
Assumptions | Megatrends in broader society include population increase, economic development, and urbanization | |
Prioritized opportunities | Provision of products and solutions that help solve climate change issues in society pertaining to agriculture and water resources | |
Action plans | Roadmap formulated from short-, medium-, and long-term perspectives | |
Financial plans | Capex and R&D costs associated with climate change measures included in Mid-Term Business Plan 2025 | |
Risk management |
Description of risks | Identification of risks in the 1.5°C/2°C and 4°C temperature increase scenarios for the Farm & Industrial machinery and Water & Environment businesses |
Challenges and uncertainties | Subject to major changes, depending on future technological development and market trends, because roadmap is based on mainly data currently available for analysis | |
Metrics and targets |
Metrics, targets, dates | See P28-32, 50 of ESG Report 2023 |
Methodology | For Scope 1 and 2, both total emissions and per-unit emissions have been set as metrics. The total emissions metric is based on the target level (halved by 2030 and carbon neutral by 2050) required under the 1.5°C temperature increase scenario. The rate of renewable energy utilization has also been added as a metric. Results assured by a third party for each fiscal year are disclosed on our website. | |
GHG emissions reductions | For Scope 1 and 2, we will reduce emissions by 50% by 2030 compared to 2014 levels. See P36-37 of ESG Report 2023 for 2022 emissions. Scope 3 emission reductions curreltly being examined |
- Transition plan
-
In the TCFD recommendations, a transition plan is defined as “...an aspect of an organization’s overall business strategy that lays out a set of targets and actions supporting its transition toward a low-carbon economy, including actions such as reducing its GHG emissions.” Investors and other users of TCFD information are interested to know how organizations will reduce climate risks and increase business opportunities as they transition to a low-carbon economy. The TCFD revised its recommendations in October 2021 and also released a document that provides guidance on disclosing a transition plan.
Please visit the website below for more information about the TCFD.
www.fsb-tcfd.org/
<Carbon neutrality and recycling-based society sought by Kubota in the farming sector>
The diagram below represents Kubota’s contributions, through its products and services, to carbon neutrality and the recycling of resources in the farming sector.
<Roadmap to Carbon Neutrality>
The above roadmap is based on information that can be studied at present. It is subject to major changes, depending on future technological development and market trends.
- *1)Compact electric tractors:www.kubota.com/news/2022/20220905.html
- *2)Hydrogen engines:www.kubota.com/news/2022/20221003.html
- *3)Micro hybrid engines:www.global.engine.kubota.co.jp/en/technology/microhybrid/
- *4)Agricultural solutions:www.kubota.com/innovation/smartagri/
- *5)Farm water management systems:agriculture.kubota.co.jp/product/kanren/wataras/(only in Japanese)
- *6)Systems for recycling local resources using agricultural biomass:www.kubota.co.jp/news/2022/management-20220405.html(only in Japanese)
- *7)J-Credit Scheme certification for CO2 reduction projects:www.kubota.co.jp/news/2022/management-20221226.html(only in Japanese)
- *8)Smart water pipe installation:www.kubota.co.jp/product/ironpipe/products/technology/innovation/(only in Japanese)
- *9)IoT solutions for water related plants and equipment:www.kubota.co.jp/product/ksis/(only in Japanese)
Kubota Smart Village concept
The Kubota Group has formulated a long-term vision called GMB2030 to which it aspires to achieve by the year 2030. We unveiled the Kubota Smart Village concept for a world in which we have fulfilled our ideal role as a provider of platforms that support people’s lives as part of our commitment to achieving a prosperous society and the cycle of nature. The Kubota Smart Village concept envisions a future world in which we leverage AI, IoT, and other technologies to provide hardware, software, and solutions to realize carbon neutrality and the recycling of resources.
Please visit the website below for more information.
www.kubota.com/smartvillage/
4. Risk Management
■ Risk management structure
In FY2014 the Kubota Group set up the Environmental Management Strategy Committee to deliberate on medium- and long-term
targets and key measures relating to environmental conservation, as well as the longer-term direction of environmental management, in light of climate change and other global environmental problems and the Group's operating environment. Since FY2021, discussions of environmental issues have been handled by the ESG Management Strategy Meeting, which is chaired by the president.
The objective of this meeting is to formulate policies for generating medium- to long-term corporate value from an ESG perspective and examine and evaluate key measures. Also, the outcomes of its discussions are reported to the Board of Directors and Executive Officers' Meeting, when required.
■ Process for identifying risks and opportunities
So that we can identify transition and physical risks and opportunities pertaining to climate change across the entire value chain (including direct operations and upstream and downstream processes), we identify issues of materiality relating to environmental conservation activities, including how we are tackling climate change. We identify risks and opportunities from a near-term, mediumterm, and long-term point of view and review them every year. Our materiality identification process is as follows.
Step 2: ESG Management Strategy Meeting review and discussions with related departments and identification of issues through dialogue with ESG investment institutions
Step 3: Examination of importance to stakeholders and the Kubota Group and mapping of key issues with a matrix chart
Step 4: Formulation and steady promotion of key policies after identifying the impacts (risks and opportunities) on important issues
■ Process for addressing and evaluating risks and opportunities
As for our process for addressing and evaluating risks and opportunities, we have set medium- and long-term environmental conservation targets and we continuously manage our progress towards achieving them. When establishing these targets, the ESG Management Strategy Meeting discusses the draft measures on environmental conservation as well as the medium-term (3–5 years) and long-term (5–15 years) targets. Each business site draws up a plan and then the Environmental Protection Department monitors the progress of those plans annually. The ESG Management Strategy Meeting discusses the direction of key policies and mediumand long-term initiatives based on how close the Group is to achieving its targets. Also, to tackle climate change in a way that best reflects the circumstances of each region, the Group organizes Environmental Manager Conferences in the five regions where Kubota has a business presence so that region-specific issues can be assessed and response measures studied.
5. Metrics and Targets
The Kubota Group has set medium- and long-term environmental conservation targets aiming to reduce the risks and expand the opportunities due to climate change and is working to achieve these targets. Furthermore, we collected performance data on CO2 emissions (Scopes 1 and 2) at the Group's global sites (production and non-production sites) and upstream and downstream CO2 emissions (Scope 3) and disclose our results for the past years. We have obtained third-party assurance for our main disclosure items and we are working to improve our accuracy.
Our Long-Term Environmental Conservation Targets 2030 call for a 50% reduction (vs. 2014) in Scope 1 and 2 emissions at global business sites. We also aim to achieve carbon neutrality by the year 2050, as outlined in our Environmental Vision. In order to realize that goal, we will continue to find ways to lower our energy consumption at business sites, transition away from fossil fuels primarily by replacing our cupola furnaces with electric furnaces, and ramp up our use of renewable energy.
Looking ahead, we will promote initiatives that lead to solutions for the issues of climate change by promoting environmental conservation activities and expanding our environment-friendly products and services globally.
■ Climate Change-related Targets and FY2022 Results
Action item | Management indicator | Base FY | FY2025 target*3 |
FY2030 target*3 |
Result*3 |
---|---|---|---|---|---|
Reduce CO2 emissions (Scope 1 and 2) |
CO2 emissions*1 | 2014 | — | ▲50% | ▲23.6% |
CO2 emissions per unit of production*2 | 2014 | ▲45% | ▲60% | ▲38.9% | |
Ratio of renewable energy usage*1 | — | 20% or more | 60% or more | 8.3% | |
Save energy | Energy consumption per unit of production*2 | 2014 | ▲35% | ▲40% | ▲32.5% |
Expand Eco-Products | Sales ratio of Eco-Products | — | 70% or more | 80% or more | 65.6% |
- *1.Global business sites
- *2.Global production sites
- *3.▲Indicates a negative figure.