Together with the EnvironmentDisclosure based on TCFD recommendations
The Lion Group’s Response to the TCFD
In May 2019, Lion endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), an organization established by the Financial Stability Board (FSB). From October 2019 to January 2020, Lion took part in the Ministry of the Environment’s Project to Analyze Scenarios of Climate Risks and Opportunities in Accordance with TCFD, evaluating the financial impact on its operations of climate-related risks and opportunities. In 2022, Lion expanded the scope of its analyses to encompass businesses, communities, product categories and supply chains, developing them into full-scenario analyses. The climate-related information resulting from these analyses is disclosed based on the TCFD framework.
Initiatives and Policy to Address the TCFD Recommendations
Core Elements of the TCFD’s Recommended Climate Related Disclosures
The Lion’s Group’s Initiatives
The organization’s governance around climate-related risks and opportunities.
Climate-related risks and opportunities are reported to the Sustainability Promotion Council (which meets twice a year) by its E Subcommittee and also reported, as needed, to the Senior Executive Committee, Executive Committee and Board of Directors.
In addition, a working group had been established under the Council to responsively look for business opportunities in the changes in external conditions brought about by climate change.
The actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning
Based on the TCFD recommendations, we conducted scenario analyses using a 1.5°C scenario and a 4°C scenario for the Consumer Products Business and some countries of the Overseas business, the operations of which are likely to be impacted by climate change by 2030 and 2050.
We worked to identify and evaluate short-, medium- and long-term climate-related risks for the period from the present to 2050 and factor them into our businesses, strategy and financial planning.
The processes used by the organization to identify, assess, and manage climate-related risks
The Lion Group has designated certain climate-related risks that have the potential to significantly impact the Group’s businesses as “shared risks” to be managed Group-wide. The Corporate Planning Department and E Subcommittee coordinate such management, working together to identify, assess and manage these risks.
Metrics and Targets
The metrics and targets used to assess and manage relevant climate-related risks and opportunities
The CO₂ emissions of Lion Corporation and its domestic and overseas consolidated subsidiaries (Scopes 1, 2 and 3) are currently disclosed on Lion’s website. The LION Eco Challenge 2050 long-term environmental objectives include realizing a decarbonized, resource-circulating society as well as targets for 2030 based on the metrics of CO₂ emissions, petrochemical-derived plastic usage and water usage.
Overview of Scenario Analyses
We conducted scenario analyses using scenarios in which the average global temperature increases 1.5°C or 4.5°C from the pre-industrial average by 2100. These analyses, focused on effects in 2030 and 2050, were carried out for the Consumer Products Business (for the oral care, beauty care, fabric care, living care and pharmaceutical product fields) and the Overseas Business (for businesses in China and Thailand).
The principal scenarios used for this analysis were the following.
＊Principal scenarios used for analysis of transition risks and opportunities: The IEA’s NZA and STEPS scenarios
＊Principal scenarios used for analysis of physical risks and opportunities The IPCC’s RCP1.9 and 8.5 scenarios
The analyses consisted of identifying climate-related risks and opportunities in each scenario, considering their qualitative impacts on businesses and then quantitatively estimating these impacts in financial terms in order to rate them as large, medium or small. As a result, the introduction of a carbon tax and increased raw material and packaging costs were identified as risks that have a large impact on our businesses. The expansion of markets for sustainable products was identified as an opportunity that has a large impact on our businesses. In addition, we are studying the latest literature, including the IPCC’s AR6, to envision how conditions related to daily living will shift due to climate change as a perspective for exploring new business opportunities.
The Lion Group’s Main Climate-Related Risks and Opportunities
Risks and Opportunities
Introduction of a carbon tax (Scopes 1, 2 and 3)
Increased factory operating costs due to the full-scale introduction of emissions trading and the application of carbon taxes by governments
Increased raw material procurement costs due to carbon taxes on emissions, including Scope 3 emissions
Increased cost of raw materials
Increased costs due to the full-scale introduction of emissions trading and the application of carbon taxes
Increased costs due to tightening of palm oil regulations and increased use of certified oil
Plant-derived (from corn, mint, etc.)
Increased prices due to decreases in crop yields
Increased cost of packaging and containers
Increased costs due to regulations on plastic use
Increased costs due to a shift from iron to aluminum as a result of regulations on vehicle weight, etc.
Increased costs due to forest fires, forest protections or logging regulations
Expansion of markets for sustainable products
Expansion of demand for sustainable products, including those that save water and power, due to rising customer awareness of ethical consumption
Increased average temperature
Increased operational and personnel costs due to growing energy costs and burden on workers
Increased sales of laundry-related products due to higher temperatures and of hygiene-related products and services due to increases in infectious disease
Changes in precipitation and weather patterns
Increased costs of dealing with impacts on the operations of Lion or its suppliers due to increased flooding and water stress. Potential for decreased credibility in the event that stable supply cannot be maintained.
Increased severity of extreme weather events
Decreased revenue due to internal logistics delays and supply chain interruptions resulting from increased severity of extreme weather events. Potential for decreased credibility in the event that stable supply cannot be maintained.
Note: Risks are shown in red, opportunities are shown in blue
*Impact if the LION Eco Challenge 2050 environmental objectives are not met and CO₂ emissions are not significantly reduced
Summary of Scenario Analysis Results
Lion has been advancing efforts to address the scenarios used in the most recent analyses for some time but will continue to direct management effort at further reinforcing resilience to change going forward.
Under the 4°C scenario, the increased cost of fossil fuel-derived raw materials is a major risk. Lion is already advancing efforts to replace such raw materials with plant-based materials and reinforcing other efforts aimed at decarbonization. Furthermore, to address rising physical risks, such as those of floods and water stress, we are advancing such efforts as reinforcing business continuity planning and supply chain data coordination. In terms of opportunities, the markets in such areas as products related to infection prevention and laundry are expected to grow, so we are working to develop related products and reinforce related services. Furthermore, we will continue to explore growth opportunities in the fields of inclusive oral care and infection control—areas of strength for Lion—to address the increase in the risk of the spread of infectious disease.
Under the 1.5°C scenario, the increased cost of plastic-, aluminum- and palm oil-derived raw materials and packaging is a major risk. Lion is already advancing initiatives to reduce such risk, including reducing the use of petroleum-derived plastic and procuring RSPO-certified palm oil and palm kernel oil derivatives. In terms of opportunities, we expect substantial expansion in demand for environmentally friendly products, presenting the potential for business expansion by increasing offerings of products that meet the Lion eco-standard. Furthermore, these initiatives will help to reduce CO₂ emissions during the product use and disposal stages, which account for the majority of Lion’s Scope 3 emissions. In addition to these efforts, as under the 4°C scenario, we are exploring other ways of securing opportunities for further growth. These include the development of technologies suited to the growth of sustainable fashion and other lifestyle changes as well as expanding the supply of electro-conductive carbon, which will be necessary for the development of decarbonized transportation, including the spread of electric vehicles.
In addition, we will monitor social trends as we consider measures to address issues that currently have only a small quantifiable financial impact but could present a large future risk to Lion (such as procuring high-quality mint).