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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

Related SDGs and targets
13.CLIMATE ACTION,13.1,13.3,7.AFFORDABLE AND CLEAN ENERGY,7.2,7.3,7.a,9.INDUSTRY, INNOVATION AND INFRASTRUCTURE,9.4,9.5,2.ZERO HUNGER,2.4,11.SUSTAINABLE CITIES AND COMMUNITIES,11.b,
Major Activity Content
  • Promotion of manufacturing which can lead to the mitigation of climate changes, adaptation to them, and reduction of their impacts
  • Improvement of energy usage efficiency, such as through energy saving and conservation
  • Promotion of measures to reduce energy waste and losses, focusing on JIT and automation
  • Expansion of the use of renewable energy, etc.
2030/2025 Activity Targets (KPIs)
  • Long-Term Environmental Conservation Targets 2030:
    • CO2 emissions from the Kubota Group: 50% reduction compared to the base year 2014
  • Medium-Term Environmental Conservation Targets 2025:
    • CO2 emissions per unit of production at global production sites: 25% improvement compared to the base year 2014
    • Ratio of renewable energy usage at global production sites: 1% or more
    • Energy consumption per unit of production at global production sites: 18% improvement compared to the base year 2014

Long-Term Environmental Conservation Targets 2030 and the Results for FY2021

2030 Targets Reduce CO2 emissions from the Kubota Group* by 50% compared to the base year 2014.
Result In 2021, CO2 emissions of the Kubota Group* were reduced by 16.5% 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
734 kilotons CO2e
Coverage ratio 72.8% 100%

Medium-Term Environmental Conservation Targets 2025 and the Results for FY2021

Actions items Management Indicators*2 Base FY Targets for FY2025*4 Results of FY2021
Reduce CO2*1 CO2 emissions per unit of production (Scopes 1, 2) 2014 ▲25% ▲30.0%
Ratio of renewable energy usage*3 1% or more 1.5%
Save energy Energy consumption per unit of production 2014 ▲18% ▲27.2%
  1. *1.CO2 emissions indicate 90.3% 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. *2.The figures per unit of production represent the intensity of the environmental load per unit of money amount of production. The exchange rate of the base year is used when translating the money amount of production of overseas sites into Japanese yen.
  3. *3.The applicable boundary is global sites.
  4. *4.▲ indicates a negative figure.

Mitigation of Climate Change

1.CO2 Emissions (Scope 1 and Scope 2)

In FY2021, CO2 emissions were 613 kilotons CO2e, an increase of 7.5% compared to the previous year. Additionally, CO2 emissions per unit of sales improved by 9.3% compared to the previous year. CO2 emissions declined in FY2020 due to the impact of the COVID-19 pandemic, but rose in FY2021 as production ramped up at machinery- and casting-related sites while new sites began full-scale operations. Emissions per unit of sales improved as a result of not only an increase in consolidated net sales (up 18.5% from the prior year), but efforts to lower CO2 emissions by promoting reduction measures, such as the adoption of renewable energy, switching to LEDs, promoting ways to save energy, and the installation of energy-efficient equipment.

  • Trends in CO2 Emissions*1 and Emissions Per Unit of Sales

  1. *1.The CO2 emissions for the acquired or sold company have been retroactively adjusted before the acquisition or sale. The adjusted values are: 734 kilotons CO2 in FY 2014. 694 kilotons CO2e in FY2015, 654 kilotons CO2e in FY2016, and 643 kilotons CO2e in FY2017.
  2. *2.CO2 emissions (613 kilotons CO2e) include portions of CO2 that were not released into the atmosphere but absorbed as carbon into products such as iron pipe (17 kilotons CO2e).
  3. *3.CO2 emissions refer to Scope 1 and 2 emissions from all Kubota Group sites (100%) and include greenhouse gases from non-energy sources.
  4. *4.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-FY2021 the ratio of LEDs as a percentage of all lights at production sites had increased to 90.0%. In FY2021, we worked on energy saving measures for compressed air as well.
We are also accelerating the introduction of renewable energy. In FY2021, new solar power generation systems came online at Siam Kubota Corporation Co., Ltd. (Thailand) and Kubota Engine (WUXI) Co., Ltd. (China). This brought the renewable energy consumption of the entire Group to 11,428 MWh (roughly equivalent to a 5,449-ton reduction in CO2 emissions). The ratio of renewable energy usage came to 1.5%, outstripping the 2025 target of 1.0% or more.
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 4.8 kilotons CO2e in FY2021 compared with the case where countermeasures were not implemented from the previous year. The economic effects of these measures reached 180 billion yen compared to the previous year. CO2 emissions per unit of production in FY2021 improved by 30.0% 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
  • Kubota Engine (WUXI) Co., Ltd. (China) installed solar panels capable of generating 600 kW at its plant premises. Power generation commenced in September 2021 and the amount generated annually will correspond to 20% of all electricity used.

  • CO2 Emissions by Region

  • CO2 Emissions by Business

  1. *1.CO2 emissions generated from the production of products such as agricultural machinery, construction machinery, and engines.
  2. *2.CO2 emissions generated from the production of products such as ductile iron pipes and cast steel.
  • CO2 Emissions by Emission Source

    • Japan

    • Overseas

  1. *1. Greenhouse gases from non-energy sources include the following: CO2 4.4 kilotons CO2e, CH4 0.9 kilotons CO2e, N2O 0.4 kilotons CO2e, HFC 0.6 kilotons CO2e, PFC 0 kilotons CO2e, SF6 0.003 kilotons CO2e, and NF3 0 kilotons CO2e
  • Trends in Energy Use at Business Sites and Energy Use per Unit of Sales

  1. *1.PJ=1015J, TJ=1012J
  2. *2.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
  • CO2 Emissions in Each Stage of Value Chain
    Classification Scope of calculation CO2 emissions (kilotons CO2e)*4
    2019 2020 2021
    Emissions of
    the Kubota
    Group’s
    business sites
    Direct emissions
    (Scope 1)*1
    Use of fossil fuels 303 285 303
    Non-energy-derived greenhouse gas emissions 7 6 6
    Indirect emissions
    (Scope 2)*1
    Purchased electricity and heat use 320 279 304
    Upstream and
    Downstream
    emissions
    Other indirect
    emissions
    (Scope 3)
    Category 1 Resource extraction, manufacturing and transportation related to purchased goods/services 2,446 2,322 2,982
    2 Manufacturing and transportation of capital goods such as purchased equipment 290 292 406
    3 Resource extraction, manufacturing and transportation related to purchased fuels/energy*2 27 105 112
    4 Upstream transportation and distribution*3 184 199 285
    5 Disposal of wastes discharged from business sites 26 28 31
    6 Employee business travels 10 11 11
    7 Employee commuting 6 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*3 0 0 0
    10 Processing of intermediate products 320 90*6 117
    11 Use of sold products 21,176 20,590 26,383
    12 End-of-life treatment of sold products 42 41 52
    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 24,526 23,687 30,388
    Total of Scopes 1, 2, and 3 25,156 24,256 31,001
    Scrollable
    1. *1.CO2 emissions refers to emissions from all Kubota Group sites (100%).
    2. *2.From FY2020, fuel is included along with purchased electricity in the scope of calculation.
    3. *3.Some CO2 emissions pertaining to transportation and distribution included in Category 9 were moved to Category 4 to improve accuracy. This change has been retroactively applied to prior years.
    4. *4.Totals shown may differ from the simple sum of values shown due to rounding.
    5. *5.CO2 emissions shown as “not applicable” correspond to zero.
    6. *6.The calculation of CO2 emissions pertaining to the processing of intermediate goods in FY2020 was revised to improve accuracy.

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.

Initiatives on Products and Services
Category

Major initiatives

Food
  • Provision of tractors that are capable of deep plowing necessary for growing rice in abnormally high temperatures without lowering the quality/yield, and the provision of information useful for soil cultivation, such as the proper distribution of fertilizers appropriate for high-temperature conditions
  • Provision of the Kubota Smart Agri System (KSAS) which uses ICT and robot technology, and high-performance machinery that lightens the workload in fields such as agriculture, where workers often labor in scorching heat
  • Provision of information for farmers on changes in temperature, precipitation, and the amount of solar radiation, as well as the impact thereof on crops
Water Flooding
  • As a measure for floods or other disasters caused by abnormal climate, provision of disaster-relief pumper vehicles, ultra-light, emergency sump pump units, rainwater storage and filtration products, and piping systems for manhole toilets, and so on
  • Provision of ductile iron pipes with tough tube body and excellent joint performance, which are highly effective during disasters such as typhoons and torrential rainfall
Drought
  • To address water shortage, the provision of management systems using IoT, which contribute to the efficient operation of water supply and sewage treatment systems and treatment plants
  • Provision of tank-submerged-type ceramic membrane filtering equipment and submerged membranes that purify wastewater for reuse
Management systems
  • Provision of the Kubota Smart Infrastructure System (KSIS), that leverages IoT technology to manage a variety of facilities, from dams to drainage locations, using weather information in collaboration with the NTT Group
  • Provision of the WATARAS farm water management system that allows accurate water management for remote rice paddies
Living environment
  • Provision of diesel engines for use as generators for emergency power supply during disasters and power outages
  • Provision of construction machinery to contribute to disaster prevention, as well as recovery and reconstruction
  • Provision of highly efficient air-conditioning equipment that creates a clean and comfortable indoor environment, even amid abnormal weather conditions
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.

  • Overview of WATARAS-managed “smart rice paddy dam”

■ 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.

Disclosure Items in the TCFD Recommendations Relevant Section Kubota Group ESG Report 2022
Page
Governance
a. Describe the board’s oversight of climate-related risks and opportunities. Environmental Management Promotion System P36
Corporate Governance Structure P151
b. Describe management’s role in assessing and managing risks and opportunities. Environmental Management Promotion System P36
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
P23
Environmental Management Approach
—Risks and Opportunities
P24
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
P24
Environmental Management Approach
—Key Measures
P25
c. Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2℃ or lower scenario. Environmental Vision P26
Mitigating and Adapting to Climate Change P38
Expanding Environment-friendly Products and Services P64
Risk Management
a. Describe the organization’s processes for identifying and assessing climate-related risks. Environmental Management Approach
—Materiality in Environmental Management
P23
b. Describe the organization’s processes for managing climate-related risks. Environmental Management Approach
—Materiality in Environmental Management
P23
Environmental Management Promotion System P36
Expanding Environment-friendly Products and Services P64
Internal Control—Internal Control System P161
Internal Control—Internal Control System Operation Activities (Risk Management Activities) P161
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 P36
Corporate Governance Structure P151
Internal Control—Internal Control System P161
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 P31
Mitigating and Adapting to Climate Change
—Measures to Reduce CO2 Emissions
P38
Review of the Remuneration Plan P158
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 P41
Environmental Data P81
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 P31

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 FY2021 and deliberated on environmental management issues on three of those occasions.
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.

  • Environmental Management Promotion System

  • Sites engaged in the business of operation or maintenance of environmental plants

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 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 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.

■ 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 2°C and 4°C scenarios of mainly the IPCC and the IEA based on population increase and economic development projections through 2050.

■ 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, 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.
To assess the impacts on our businesses in the year 2030, we selected the 2°C and 4°C scenarios in light of the available scientific evidence.

  • Scenario Analysis Time Horizon


Item Assumptions
Target businesses In the areas of food, water, and the environment, analyzing businesses related to food (agricultural machinery) and water that we expect to be significantly impacted by climate change
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
2°C scenario The IEA’s 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
2°C/4°C scenario IPCC’s Representative Concentration Pathways scenario*4
RCP2.6, RCP8.5
  1. *1.Source: IEA “Energy Technology Perspective 2020”
  2. *2.Source: IEA “World Energy Outlook 2020”
  3. *3.Source: FAO “The future of food and agriculture – Alternative pathways to 2050”
  4. *4.Source: IPCC “Fifth 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 agricultural machinery and water-related businesses. Much like the decarbonization of the automotive industry, we expect more stringent regulations to be adopted in the agricultural machinery business in the future and we therefore anticipate that the push for greater diversification of power sources will gain increasing momentum in this field. Given the listing (taxonomy) of sustainable economic activity in Europe and the announcement of strategies geared towards sustainable agriculture in Japan, there is a growing need to curb greenhouse gases derived from agricultural practices. 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 water-related businesses, 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 anticipate increased demand for water in society as a whole due to population increase and economic development, but there are concerns that water quality will deteriorate mainly because of the salification of groundwater caused by ising 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. 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.

  • The World in 2030 with Respect to the Agricultural Machinery Business


  • The World in 2030 with Respect to Water-related Businesses

Key: Examples of anticipated  risks  and  opportunities

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 agricultural machinery and water-related businesses and then formulated strategies to deal with those impacts.

■ Results of Climate Change Scenario Analysis of Each Business Field


Changes considered in agricultural machinery-related businesses

Changes considered Value chain impacts Scenario
Procurement Direct operations Products 2°C 4°C
Changes in product design and conditions of use owing mainly to tougher climate change-related regulations    
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 agricultural machinery-related businesses

Revenue  Expenses

Scenario Summary of scenario analysis results
(changes in market and operating environment)
Evaluation results (2030) Financial
impacts (2030)
2°C Risks
[Technologies]
Changes in product design and conditions of use owing mainly to tougher climate change-related regulations
  • Likelihood that controls on fuel-efficiency improvements in internal combustion engines will be further tightened
  • Japan, the US, and European countries have announced carbon neutrality roadmaps for around 2050 and the transition to electrification and BEVs in the passenger car market in particular is gaining momentum
  • Likelihood that new regulations will be applied to products that use internal combustion engines, like agricultural and construction machinery and utility vehicles, and that the need to reduce CO2 emissions will grow stronger and demand for electrification, fuel cells, hydrogen engines, e-fuel, and other power sources will grow increasingly diversified
  • We need to aggressively pursue R&D of products that offer improved fuel efficiency and can run on various power sources
R&D costs
  • The impact on revenue will be limited because the adoption of carbon-free energy will be partially limited to mainly developed countries and the switch to electric-powered machinery will be confined to applications only for which it is possible
Revenue
Opportunities
[Markets]
Changes in mode of agriculture owing to promotion of decarbonization in the industry
  • Crop yields will increase as farming technology advances and the effective use of farming land is further encouraged to mitigate the impacts of climate change
  • Likelihood that decarbonization in agriculture will continue to gather momentum in developed economies and that the adoption of sustainable farming methods will become more widespread
  • Likelihood that decarbonization and modernization of agriculture in emerging economies will progress concurrently and give rise to smart farming and farming solutions, which in turn will spur demand for energy-efficient agricultural machinery
  • Likelihood of stronger demand for carbon-free farming methods, such as non-tilled cropping, that lead to increased carbon storage in the soil
  • We expect higher revenue from products and services that contribute to low- or zerocarbon farming
Revenue
4°C Opportunities
[Resilience]
Changes in suitable farming land (changes in demand for agricultural machinery and farming methods)
  • Climate change will affect the relocation of suitable farming land and crop production
  • Likelihood of increased demand for farming solutions and support to transition to new agricultural machinery and farming methods, including smart machinery and precision agriculture
  • Changes in demand for farming solutions are expected to emerge in wet climate regions, especially North America, Asia, and some parts of Europe
  • We expect higher revenue from products and services that can be adapted to changing weather conditions
Revenue
Countermeasure strategies
We intend to contribute to the reduction in CO2 emissions with the use of innovative agricultural machinery.
  • Continue to bolster R&D aimed at improving fuel efficiency of engines most likely subject to tighter restrictions up ahead
  • Bring to market electric-powered agricultural machinery and expand product lineup
  • Accelerate R&D towards the practical application of various power sources, such as synthetic fuels, hybrid motors, total electrification, fuel cells, or hydrogen engines according to the usage environment in each region

We will look to help lower greenhouse gas emissions from farming and support sustainable food production activity.
  • Propel R&D in products and services that can be adapted to low- or zero-carbon farming practices and changing weather conditions; for example, recycling of local biomass resources and carbon storage
  • Expand and popularize agricultural machinery and services that make smart farming (automated machinery, precision agriculture, etc.) possible so as to contribute to more efficient farming that requires less manpower
  • Give tangible shape to farming solutions in regions affected by changing weather conditions
  • Expand applications for the following systems that integrate cutting-edge technology with ICT to contribute to greater farming efficiency: Kubota Smart Agri System (KSAS), a system that supports farm operations; Kubota Smart Infrastructure System (KSIS), an IoT solutions system; and WATARAS, Kubota’s farm water management system
Initiatives helping to fight climate change
  • Contributing to greater efficiency and labor-saving in agriculture with the Agri Robo tractor

  • Contributing to lower CO2 emissions from the operation of agricultural machinery with battery-powered tractors

  • Compact and electronically
    controlled fuel-efficient diesel engine

  • Control screen of the Kubota Smart Agri System (KSAS), which contributes to more efficient farming


Changes considered in water-related businesses

Changes considered Value chain impacts Scenario
Procurement Direct operations Products 2°C 4°C
Changes in society’s awareness of decarbonization  
Changes in social trends regarding the securing and conserving of water resources      
Changes in society’s awareness of weather disasters      
Results of analysis of water-related businesses

Revenue  Expenses

Scenario Summary of scenario analysis results
(changes in market and operating environment)
Evaluation results (2030) Financial
impacts (2030)
2°C Risks
[Regulations &
Technology]
Changes in society’s awareness of decarbonization
  • Likelihood of stronger calls for decarbonization across a product’s life cycle worldwide, including the introduction of carbon pricing schemes and carbon border adjustment mechanisms
  • Likelihood of customers demanding low- or zero-carbon manufacturing processes
  • Likelihood of higher energy prices owing mainly to a society-wide push for the deployment of renewable energy
  • Investment in carbonfree and energy-saving equipment will increase
Capital
expenditures
  • Manufacturing costs will rise, driven by higher energy and raw material prices
Cost of sales
Opportunities
[Markets]
Changes in social trends regarding the securing and conserving of water resources
  • Ongoing population increase and economic development is expected to further drive up demand for water
  • Likelihood that restrictions will be enforced on the intake and discharge of water for household and industrial use in developed countries and Asia as a preventive measure against stretched water resources and deteriorating water quality owing to the impacts of climate change
  • Likelihood of increased demand for solutions that resolve water shortages and poor water quality
  • We expect higher revenue from the provision of products and solutions in connection with the development of water and sewage infrastructure
Revenue
4°C Opportunities
[Markets]
Changes in society’s awareness of weather disasters
  • Climate change is expected to negatively affect people’s living environment chiefly because of the more frequent occurrence of typhoons, torrential rain, and other natural disasters, alongside drought and deterioration in water quality
  • Likelihood of heightened demand for stronger resilience of existing water and sewage infrastructure, upgrades to aging facilities, and improvements in water quality in order to combat increasingly intense natural disasters
  • Likelihood of growing demand in Japan for water-related products aimed at bolstering national resilience in response to increasingly intense natural disasters as a consequence of climate change
  • We expect higher revenue from theprovision of products and solutions in connection with the development of more resilient water infrastructure, disaster response measures, and water quality improvements
Revenue
Countermeasure strategies
We intend to contribute to the effective use of water resources.
  • Contribute to the development of water and sewage infrastructure to meet increased water demand
  • Expand offerings of purification and sewerage treatment products and solutions to help improve water quality

We intend to contribute to the building of water infrastructure that is resilient to weather disasters.
  • Expand provision of disaster prevention and disaster response products; for example, ductile iron pipes that can withstand disasters and drainage pump trucks that can meaningfully contribute when disasters occur
  • Expand applications for the Kubota Smart Infrastructure System (KSIS) to support water treatment plant operations and the remote monitoring, diagnosis, and control of equipment

We hope to alleviate higher manufacturing costs with energy-saving and CO2 emission reduction measures.
  • Facilitate energy saving and the reduction of CO2 emissions in manufacturing processes
Initiatives helping to fight climate change
  • Ductile iron pipes make water supply possible even during times of disaster

  • Submerged membranes can also be used to recycle wastewater

  • The Kubota Smart Infrastructure System (KSIS) makes facility management and operation more efficient and less reliant on manual labor


Changes considered that apply to both agricultural machinery and water-related businesses

Changes considered Value chain impacts Scenario
Procurement Direct operations Products 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 both agricultural machinery and water-related businesses

Revenue  Expenses

Scenario Summary of scenario analysis results
(changes in market and operating environment)
Evaluation results (2030) Financial
impacts (2030)
2°C Risks
[Regulations]
Changes in decarbonization approach of companies sought after by society
  • Likelihood that regulations and measures geared towards decarbonization will gather momentum and that the rollout of a carbon tax scheme and impetus for the use of renewable energy will accelerate
  • Likelihood of higher taxes on fossil fuels and CO2 emissions owing to the introduction of a carbon tax
  • Energy costs and expenses associated with energy-saving measures are expected to rise when governments worldwide enforce stricter energy-saving restrictions
  • Investment in carbon-free and energy-saving equipment will increase
Capital
expenditures
2/4°C Risks
[Physical]
Impacts on the Group and suppliers as a result of more abnormal weather events
  • Likelihood of increasingly intense and more frequent meteorological disasters like torrential downpours and floods
  • Negative effects on business activities are expected to be felt at the Group’s sites and at suppliers
  • Likelihood that production and sales activities will be affected by delays in procuring raw materials
  • We expect that sales will be dented by the negative impacts of weather disasters like torrential rain, flooding, and high winds on production and procurement
Revenue
Countermeasure strategies
We intend to contribute to the reduction in CO2 emissions generated by business activities.
  • Promote initiatives aimed at conserving energy use, installing energy-efficient equipment, switching fuels, installing LED lighting, and expanding the use of renewable energy at production sites

We will aim to beef up climate change risk countermeasures at the Group’s sites and at suppliers.
  • Use hazard maps to identify sites that are at high risk of suffering damage from torrential rain, flooding, and strong winds and systematically push ahead with the reinforcement of buildings and measures to prevent electrical equipment from being inundated by water
  • Decentralize the purchasing of parts and materials by diversifying procurement routes
  • Construct a manufacturing system that is resilient to weather disasters based on a business continuity plan (BCP)

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 1: Collection and analysis of information, including international policies, third-party assessment indicators, and global trends in the Group’s fields of business
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 all 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 FY2021 Results

Action item Metric Base FY Target*2 Result*2
Long-Term Environmental
Conservation Targets 2030
Reduce CO2 emissions CO2 emissions for the Kubota Group 2014 ▲50% ▲16.5%
Expand Eco-Products Sales ratio of Eco-Products 80% or more 68.0%
Medium-Term Environmental
Conservation Targets 2025
Reduce CO2 emissions CO2 emissions per unit of production*1 2014 ▲25% ▲30.0%
Ratio of renewable energy usage 1% or more 1.5%
Save energy Energy consumption per unit of production*1 2014 ▲18% ▲27.2%
Expand Eco-Products Sales ratio of Eco-Products 70% or more 68.0%
  1. *1.For global production sites
  2. *2.▲ indicates a negative figure.