Toward the realization of a decarbonized society
Statement of support for TCFD recommendations and disclosure of climate change-related information (Information disclosure based on TCFD recommendations)

Kyowa Kirin Group identifies issues (materialities) that our Group should prioritize due to their impacts on social sustainability and our Group's business and incorporates these into its Medium-term Management Plan. In particular, we regard the climate change initiatives (global warming prevention) as one of the most important issues in our materialities, and we are proceeding with various initiatives company-wide.
In November 2021, Kyowa Kirin Group expressed its support for the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and, based on these recommendations, it will be evaluating and managing climate change-related risks and opportunities and disclosing appropriate information.
In December 2018, the Company’s parent company Kirin Holdings Co., Ltd., announced its support for the TCFD recommendations on behalf of Kirin Group to which our Company belongs.

Governance

The Representative Director and Executive Vice President has been appointed the chief executive responsible for overall environmental management inclusive of climate change issues.
Issues pertaining to climate change risks and opportunities, environmental activity policies and results, etc., are reported to the CSR Committee chaired by the Representative Director and Executive Vice President, which deliberates on these issues as key aspects of our Group’s environmental management and makes relevant decisions in its regular meetings. The CSR Committee also informs the Board of Directors of these reports, deliberations and decisions, which are shared with all Directors.
Since fiscal 2020, the TCFD Review Team has been set up within the CSR Management Department, which is responsible for the environmental management control function, and has been identifying and evaluating climate change risks and opportunities and considering countermeasures.
The risks and opportunities identified are regularly reviewed by the CSR Management Department and other relevant departments and reported/referred to the CSR Committee so that climate change-related issues can be addressed as part of our management strategy.

Strategy

Analysis and evaluation of climate change risks and opportunities

The TCFD Review Team has taken the lead in conducting scenario analysis of climate change risks and opportunities using 1.5°C, 2°C and 4°C scenarios and has examined short to medium-, and long-term business impacts (the financial impacts of transition*1 and physical*2 risks and opportunities) as well as policies and business strategies for responding to these business impacts.
As a result, we confirmed that there are some risks of flood damage caused by torrential rains and floods and of carbon taxes and other carbon pricing.

  1. 1.
    Increase in torrential rainfall, typhoons and floods (risk)
    We confirmed that these risks would have a huge impact on global production activities, causing long-term suspensions of operations due to flooding at plant premises and research laboratories and imposing costs to restore these premises to their original state.
    In response, we have already conducted water risk assessments at our own production site, determined flood and inundation risks and implemented countermeasures to reduce the risks. In addition, we have formulated a BCP (Business Continuity Plan) for large-scale natural disasters, and we will be taking flood prevention measures to mitigate flood damage (e.g., geographically distributing the storage of important production-related assets, waterproofing buildings, installing key equipment on off-ground floors and locating facilities on high ground, and installing flood prevention walls) as well as making suitable capital investments. Going forward, we will continue to minimize risks by conducting impact assessments and instituting responses for the entire supply chain.
  2. 2.
    Carbon pricing (carbon taxes, emissions trading systems) (risk)
    Carbon taxes and other forms of carbon pricing as well as the tightening of CO2 emission regulations are expected to tie taxation to CO2 emissions but, because we will be able to significantly reduce our tax expenses and electricity purchase costs by pursuing energy-saving measures, introducing/expanding the use of renewable energies, switching energy sources, etc., and achieving our 2030 targets as well as our 2050 goal of zero CO2 emissions, we believe it is important to implement these measures as planned.
    We are confident that the impact of this risk on our Group's business activities can be minimized by implementing the above-mentioned measures.
  3. 3.
    Changes in the number of hay fever patients (opportunity)
    Rising temperatures have increased the number of hay fever patients, with opportunities in the allergy drug market likely to emerge as a result, but we believe the actual impact on sales revenue will be limited. We regard new developments in this field to be important elements in our future business strategies to meet medical needs in keeping with our management philosophy, so this opportunity remains under consideration.
  • *1:
    Transition risks: risks brought about by changes in climate change policies and regulations, technological developments, market trends, market valuations, etc., as decarbonization policies are strengthened around the world
  • *2:
    Physical risks: acute or chronic damage caused by disasters stemming from climate change due to uncertain decarbonization policies

Climate change risks and opportunities

1.5°C scenario
Transition risk

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Policies/regulations
Climate change drivers Potential impacts Impact Resilience
(Positive impacts improved and negative impacts reduced by countermeasures)
Impact
Carbon pricing (carbon taxes, emissions trading systems) Carbon taxes continues to be assessed
Short to medium term: approximately 410 million yen/year
Long term: approximately 900 million yen/year
Small
(risk)
Although a carbon tax burden will be incurred under both the 2°C and 1.5°C scenarios, the carbon tax burden can be reduced by pursuing energy-saving measures, introducing/expanding the use of renewable energies, switching energy sources and pursuing other measures and achieving the SBT 1.5°C target. ±0
Tightened CO2 emission regulations Electricity purchase costs:
Short to medium term: approximately 1.22 billion yen/year
Long term: approximately 1.22 billion yen/year
Benefit of drop in renewable energy unit price: 310 million yen reduction
Slight
(opportunity)
Small
(opportunity)

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Demographics/economics/geopolitics
Climate change drivers Potential impacts Impact Resilience
(Positive impacts improved and negative impacts reduced by countermeasures)
Impact
Population growth in emerging countries / economic globalization Increases in infectious diseases caused by unknown viruses, outbreaks of pandemics Short to medium term and long term:
There will be almost no impact because infectious diseases are not a priority domain.
±0 Infectious diseases are not a priority domain at present, so there will be almost no impact on sales revenue and few opportunities available. Nevertheless, we will continue to address the negative financial impacts of the spread of emerging infectious diseases by implementing measures to combat infectious diseases and bolster our business processes as we have done throughout the COVID-19 pandemic. ±0
Difficulty in procuring raw materials such as starch and lactose, and deterioration of quality Short to medium term and long-term:
The procurement costs of grains and dairy products are forecast to rise by 5% to 10%, but the increase in the procurement costs of raw materials such as starch and lactose will be slight and the amount of these used is small compared to other industries, so there will be almost no effect.
±0 By determining procurement policies based on raw material procurement risks and considering measures such as multiplying and diversifying procurement sources (areas), the risk will be reduced, the negative impact will be mitigated, and the impact will be zero. ±0

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Society
Climate change drivers Potential impacts Impact Resilience
(Positive impacts improved and negative impacts reduced by countermeasures)
Impact
Changes in social values Increasing need for wrapping paper derived from certified materials
Increasing interest in the environment and health and changes in eating habits
Short to medium term and long term:
The negative impact on sales revenue connected with lifestyle-related (diabetes-related) illnesses will be limited.
Slight
(risk)
We will continue to study target levels for materials/raw materials and packaging (FSC certified paper, plastic, etc.) and respond in a timely manner.
The number of patients with lifestyle-related diseases is expected to increase. Based on trends and needs in emerging countries and elsewhere, we will consider expanding our business in accordance with our management philosophy and take the appropriate steps.
This will mitigate the negative impact and increase the positive impact.
±0
4°C scenario
Physical risk

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Rising average temperature and changes in rainfall patterns (acute)
Climate change drivers Potential impacts Impact Resilience
(Positive impacts improved and negative impacts reduced by countermeasures)
Impact
Extreme temperature rise Short to medium term and long term:
Increased costs due to increased power consumption.
Small
(risk)
Same as the increase in energy consumption due to greater air-conditioning load. Small
(opportunity)
Increase in torrential rains, typhoons and floods Short to medium term and long-term:
There is a risk of impacts on domestic and overseas production activities due to flood damage (including the risk of impacts on supply chains such as contract manufacturing and distribution).
Inundation of plant premises and research laboratories will result in long-term suspension of operations and enormous costs to restore the status quo.
The amount of damage caused by the suspension of production due to plant flooding is expected to be considerable, and the impact on business, including the loss of business opportunities, will be enormous.
Large
(risk)
We have already conducted a water risk assessment of our production bases and determined flood and inundation risks.
In addition to formulating a flood damage control policy and implementing inundation prevention measures (e.g., geographically distributing the storage of important production-related assets, waterproofing buildings, installing key equipment on off-ground floors and locating facilities on high ground, and installing flood prevention walls), we will be making suitable capital investments.
We will assess and cope with impacts throughout the supply chain to avoid production suspension and minimize damage.
As such issues would have a significant impact on active pharmaceutical ingredient manufacturing licensees and packaging material suppliers, we will consider pursuing discussions on flood countermeasures, determining issues, formulating BCPs and conducting disaster response training with these partner companies.
Slight
(risk)
Outbreaks and increases in large-scale fires Short to medium term and long term:
There would be almost no impact on production.
±0 Assessment findings indicate that there will be no significant impact. ±0

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Rising average temperature and changes in rainfall patterns (chronic)
Climate change drivers Potential impacts Impact Resilience
(Positive impacts improved and negative impacts reduced by countermeasures)
Impact
Changes in the number of hay fever patients Short to medium term and long term:
Current sales revenues for allergy drugs are estimated to increase as the number of patients increases, but the actual impact on sales revenue will be limited.
Medium
(opportunity)
Although our impact assessment anticipates a positive impact, we believe the actual impact on sales revenues for the allergy drug market will be limited.
We believe that a more careful examination of new developments in this field will be required in order to respond to medical needs in accordance with our management philosophy.
Given the existence of unmet medical needs (UMN), etc., we recognize that this will become a key point in our Group’s future strategies.
Medium
(opportunity)
Increased energy consumption due to higher air conditioning load Short to medium term and long term:
Increased power consumption should raise costs by approximately 400 million yen/year.
Small
(risk)
We recognize that the immediate challenges are reducing power costs, which are expected to increase as the temperature rises, and cutting Scope 2 emissions.
In addition to introducing power from renewable energy sources, we will create added value through reducing power consumption by prioritizing air conditioner upgrades and steadily reduce power consumption by undertaking aggressive capital investments and making operational improvements to equipment. At the same time, we will strive to introduce on-site PPA and other means of solar power generation to cut CO2 emissions. We will also seek to visualize our energy consumption through digitalization.
By achieving our 2030 and 2050 targets, we believe that the cost advantages of renewable energy will outweigh the disadvantages of increased air conditioning costs due to rising temperatures.
Small
(opportunity)

Scenario analysis method

The transition to a decarbonized society and progressing climate change will have a diverse range of impacts on our business and, given the complex interaction of numerous factors and channels, we first defined these relationships, assessed the climate-related risks and opportunities (specific transition risks, physical risks and opportunities) suggested in the TCFD recommendations, and identified key drivers (factors with high uncertainty that can have a decisive impact on business performance).
We conducted scenario analyses on these key drivers using climate change scenarios.

Selection of climate change scenarios
We carried out analyses and assessments using the 1.5°C and 2°C scenarios representing progress toward a decarbonized society and the 4°C scenarios characterized by greater global warming. The 1.5°C and 2°C scenarios are the “Sustainable Development Scenario” developed by the International Energy Agency (IEA), and the 4°C scenarios comprising one of the Representative Concentration Pathways 8.5 (RCP8.5) scenarios formulated by the Intergovernmental Panel on Climate Change (IPCC) in which a temperature rise of about 4 degrees is expected by 2100 as well as the “Stated Policies Scenario,” etc., compiled by IEA.
Reasons for scenario selection
The RCP8.5 scenario is one of the Representative Concentration Pathways developed by the IPCC in which a temperature rises of about 4°C is predicted by 2100. This scenario is widely used internationally as a 4°C scenario and it was selected as one of the reference scenarios when creating the 4°C scenario.
The Sustainable Development scenario is one of the scenarios referenced in the World Energy Outlook (WEO). WEO is the flagship publication of IEA and is widely recognized as the most reliable source of energy forecasting and analysis in the world. The Sustainable Development scenarios show a path consistent with the Paris Agreement of trying to keep temperature rise below 2°C and (if possible) 1.5°C and with our own 1.5°C target, which is why we chose them as our 1.5°C and 2°C scenarios.
Scope and target of analysis
The scope of analysis includes domestic and overseas plants and research laboratories, manufacturing licensees and suppliers, and the periods covered are 2020 to 2030 (short to medium term) and 2031 to 2050 (long term).

Risk/opportunity management

In identifying risks/opportunities, we analyze the timing and probability of occurrence as well as the range and magnitude of impact for each risk/opportunity, and comprehensively evaluate the details of countermeasures to determine priorities. We identify and manage those items that would have a large impact on our business, items for which we have a significant social responsibility and items with a high probability of occurrence.
The identified risks and countermeasures are reported to, and then deliberated on and approved by the CSR Committee. Based on the policies and measures approved by the CSR Committee, the relevant departments comprehensively manage the risks in implementing these policies and measures. The impacts of risks and opportunities are regularly reviewed and the management status reported at CSR Committee and Board of Directors meetings.

Metrics & Targets

Kyowa Kirin Group 2030 CO2 emission reduction target: 55% lower than 2019*1

Background to goal setting

In pursuit of “a society that overcomes climate change” that constitutes “the society of 2050 that we want to create together” with respect to climate change described in the Kirin Group Environmental Vision 2050, Kirin Group has set a target of reducing greenhouse gas emissions for the entire value chain to net zero and is working with stakeholders to reduce CO2 emissions and take the lead in building a decarbonized society.
In addition, Kirin Group as a whole has set the more specific medium- to long-term goals of reducing CO2 emissions to 50% of their 2019 levels by 2030 (Scope 1 and 2)*2 and achieving RE100 by 2040.
Kyowa Kirin Group set and pursued a global goal of reducing CO2 emissions in fiscal 2020 to 85% or less fiscal 1990’s emission*3. This target was ultimately achieved, with CO2 emissions from domestic and overseas plants/research laboratories cut to 62% of fiscal 1990 levels (a 38% reduction)*3 in 2020.
As another approach to combating climate change, we have collaborated with our parent company Kirin Holdings Co., Ltd, to set and pursue a target of reducing CO2 emissions by 20% from their FY2015 levels by 2030*3 based on Science Based Targets (SBT). This target was revised in 2021 in response to growing social demand for addressing climate change, with the new CO2 emission reduction target for 2030—a 55% reduction in emissions from 2019 levels*1—based on the SBT 1.5°C target linked to the Kirin Group's medium- to long-term targets noted earlier and even more ambitious than the Kirin Group’s target.

Action plan for achieving our 2030 target

A roadmap for achieving the new target has been prepared and incorporated into the Medium-term Management Plan 2021-2025, targets set and managed for each fiscal year (e.g., achievement rate of CO2 emission reduction, renewable energy introduction rates, and reduction of specific energy consumption unit by 1% year-on-year), and measures necessary to achieve these goals studied and implemented in collaboration with the Kirin Group.
Together with making equipment improvements by introducing mostly energy-saving air-conditioning equipment, putting the latest energy-saving equipment in new buildings and installing spot air conditioning as well as by undertaking necessary capital investment, we are also seeking to make “software” improvements in refrigeration machine control and air-conditioning management to save still more energy through greater productivity. We also intend to achieve significant reductions in CO2 emissions by 2025 by gradually switching to renewable energy sources for the electricity used at major workplaces in Japan. By 2030 we plan to have introduced and expanded renewable energy use to all our Group’s workplaces, including overseas business locations and domestic branch offices.
On the other hand, we are considering introducing solar power generation equipment using the on-site PPA model at plants and research laboratories in Japan and installing solar power generation equipment in overseas production establishments, looking to accelerate our reduction of CO2 emissions by implementing these measures.
Our Group’s core plant, the Takasaki Plant, introduced "Aqua Premium"*4 on January 1, 2020, thereby switching to hydroelectric power that does not emit CO2 for 75% of its electricity use. With this introduction of "Aqua Premium," approximately 23,400,000 kWh of the Kyowa Kirin Group's annual power consumption of about 72,418,000 kWh*1 has been switched over to hydropower sources. The Kyowa Kirin Group's annual CO2 emissions have thus been cut by approximately 21% (approximately 11,000 tons)*1. The Kyowa Kirin Group is the first company in the pharmaceutical manufacturing industry to introduce "Aqua Premium."

Greenhouse gas emissions in the value chain (Scope 3)

Greenhouse gas emissions (Scope 3) in our Group's value chain are calculated in 15 categories in accordance with guidelines from the Ministry of the Environment consistent with the GHG Protocol. We will continue working to reduce Scope 3 emissions to achieve the Kirin Group's goal of "net zero greenhouse gas emissions for the entire value chain in 2050."

  • *1:
    Covers the Kyowa Kirin Group's plants and research laboratories.
  • *2:
    The Kirin Group's 2030 target has been approved as a target based on the 1.5°C target in the international "Science Based Targets initiative" (SBTi).
    SBTi: an international initiative that encourages companies to set scientific evidence-based greenhouse gas reduction targets in accordance with the Paris Agreement
  • *3:
    Covers the plants and research laboratories of Kyowa Kirin Group and Kyowa Hakko Bio Group.
  • *4:
    This is the first rate plan in Japan provided by TEPCO Energy Partner, Inc. that supplies only electricity from hydroelectric power plants that do not emit CO2.