Based on the Paris Agreement adopted at the COP 21 (21st Conference of the Parties to the United Nations Convention on Climate Change), we developed the greenhouse gas emission reduction target by 2030 based on scientific grounds that are consistent with the Paris Agreement and have been promoting the reduction activities under the New Shared Value Creation Strategy TOTO WILL2030 toward the realization of a carbon-neutral and sustainable society by 2050.As for the reduction of CO2 emissions from business sites (Scope 1 + Scope 2), we work to improve energy saving/renew large facilities. As for the reduction of emissions, we work to improve energy saving, renew large equipment, expand the introduction of renewable energy and for electricity to use, we aim to use 100% renewable energy.
In addition, customers use TOTO products in their daily lives for as long as 10 to 20 years, and more than 90% of the CO2 is emitted during the product use phase when we look at the entire product lifecycle. As for the reduction of CO2 emissions during the product use phase, we will further evolve our products' environmental performance and by globally commercializing our Sustainable Products, a bathroom and kitchen product group that is unique to TOTO, that balance cleanliness, comfort, and the environment, we will contribute to the realization of a rich and comfortable society that gives consideration to the global environment.
We agree with the international initiatives toward the realization of a carbon-neutral and sustainable society.
In May 2019, we agreed with the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD).
Based on the recommendations of TCFD, we have analyzed the opportunities and risks led by climate change in several different scenarios and disclosed information on our governance, strategy, risk management, targets and objectives.
In April 2021, we joined an international initiative RE100.
We aim to use 100% renewable energy for the electricity used in our business activities by 2040.
In June 2021, we acquired the certification of the SBT (Science Based Targets) Initiative. Our greenhouse gas reduction target toward 2030 has been recognized as the level to hold the increase in global temperature to well below 2 degrees C as compared to the pre-Industrial Revolution.
Regarding initiatives for realizing a sustainable society, the TOTO Group discloses information based on recommendations by the Task Force on Climate-related Financial Disclosures (TCFD).
We recognize that the impact of climate change is a serious business risk. The agenda for our sustainability activities, which includes efforts toward climate change, is deliberated and executed by the Sustainability Committee, which is chaired by the president and meets twice a year. In addition, these activities are supervised by the Board of Directors.
We formulated the New Shared Value Creation Strategy TOTO WILL2030 with a focus on achieving a carbon-neutral and sustainable society by 2050. The aim is to create an enriched and comfortable future society that has no impact on the global environment and to achieve economic growth. We engage in sustainability management through our key material issues (materiality) of Cleanliness and Comfort, Environment, and Relationships. Additionally, we have been expanding the popularization of our sustainable products—bathroom and kitchen plumbing products unique to TOTO—that balance cleanliness, comfort, and the environment.
Analysis of Business Risks and Opportunities Caused by Climate Change
We specify the long-term business risks and opportunities caused by climate change based on the classifications as defined by the TCFD (transition risks, physical risks, and opportunities) and carry out scenario analysis.
<Summary of Scenario Analysis>
Analysis referred to projections by the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC) and calculated the impact of business risks and opportunities. This was based on the scenarios for global average temperature increases of less than 2°C or 4°C since before the industrial revolution and makes assumptions about social conditions in 2030. The results of this analysis confirmed that, under either scenario, there is a risk of increased costs and the impact of natural disasters but also an increase in opportunities to contribute to the environment through water-saving products.
＜Assumptions about Social Conditions in 2030＞
●Social conditions under the 2°C scenario
-Environmental policies and regulations are widely reinforced, resulting in steep rises in carbon prices
due to the introduction of carbon tax, which accelerates the introduction of renewable energy.
-Scale and frequency of natural disasters remain largely unchanged as a result of controlling impact of
●Social conditions under the 4°C scenario
-Environmental regulations to reduce greenhouse gases experience no significant reinforcement.
-Impacts from natural disasters increase and demand for water expands.
<Degree of Financial Impact and Response>
We analyzed the risks and opportunities that social conditions in 2030 present to TOTO and considered our response to these.
Business Risks and Opportunities for TOTO
Degree of Financial Impact*
|Steep rise in carbon prices
･Energy-saving improvement / Large equipment renewal
･Expansion of renewable energy introduction
|Increase in production costs and procurement costs for raw materials and electricity
･Promotion of platform and modular design
･Transition to smart factories
|Suspension of factory operations and increase in insurance costs due to the impact of natural disasters
･Creation of business continuity plan (BCP) system
･Strengthening of response to natural disaster risks
Increase in demand for water provides opportunities to contribute by offering water-saving products
･Increase in demand for water- and energy-saving products due to purchase support systems and regulations
･Increase in consumer awareness toward water and energy conservation
･Spread of sustainable products
･Evolution of environmental performance
* Small: Less than ¥2 billion, Medium: Between ¥ 2 billion and ¥ 5 billion, Large: More than ¥5 billion
< Introduction of Internal Carbon Pricing (ICP) >
Due to the introduction of internal carbon pricing (ICP), we are promoting capital investment that contributes to reducing CO2 emissions while analyzing the degree of financial impact brought about by climate change.
• ICP: \15,000 per t-CO2*
• Scope of system: Change in CO2 emissions and large-scale capital investment
• Adopted method: Cost conversion of change in CO2 emissions by applying ICP
* Set based on future outlook by the IEA
We are engaged in risk management and have formulated the TOTO Group Risk Management Policy. Under the supervision of the president, the Risk Management Committee assesses business-related risks, including climate change, that may have a significant impact on our business and society. The committee identifies and manages serious risks, reporting them to the Board of Directors.
Furthermore, environment-related risks are managed at each business division and business site based on the environmental management system.
Principal Major Risks
Each major risk is mapped out on a matrix evaluating degree of impact and frequency of occurrence from the viewpoints of damage to the brand, impact on personnel and financial consequences along an assumption scenario,and monitored by the Risk Management Committee, and risk mitigation activities are promoted throughout the entire Group.
|Intensifying competition to recruit human resources
|Inability to procure raw materials
|Changes in market environment
|Defect in products
|Filing of lawsuits
|Rapid technology innovation
|Political, economic, social risk
|Geopolitical risks within our global businesses
|Rapid declines in product prices due to intensifying competition from rival companies
|Compliance violations including within the supply chain
|Spread of infectious disease
|Risk of financial damage caused by rumors
|Intellectual property infringement
|Risk of disastor
|Occupational safety and health
|Leakage of confidential and personal information
|Occurrence of disruptions to information systems
We formulated indicators and goals based on Science Based Targets (SBT) as milestones for 2050 with the aim of realizing a carbon-neutral and sustainable society by 2050.
Reduction in total CO2 emissions from business sites
(Scope 1 and Scope 2)
Reduction of 30% compared to fiscal 2018
CO2 emitted when product is used
(Scope 3 Category 11)
Reduction of 15% compared to fiscal 2018
Additionally, we are currently considering setting targets for the 1.5°C scenario.
Under the New Shared Value Creation Strategy TOTO WILL2030, we set a vision of realizing a carbon-neutral and sustainable society by 2050.
As a milestone for achieving this vision, we have set targets for 2030 and have acquired and are promoting certification for SBT initiatives and targets for reducing greenhouse gas emissions based on scientific grounds.
In Scope 1 emissions, sanitary ware manufacturing makes up a high percentage of fossil fuel-based CO2 emissions.Accordingly, we are promoting the reduction of emissions, such as by advancing large equipment renewal for efficient kilns at the same time as improving energy-saving capabilities.
In reducing Scope 2 emissions, we aim to expand the introduction of electricity generated through renewable energy. Going forward, we will promote initiatives for achieving a carbon-neutral society in line with social trends toward the utilization of hydrogen and CO2.
In Scope 3, we have been expanding the popularization of our sustainable products that balance cleanliness, comfort, and the environment and further advancing their environmental products.
At the same time, we believe that social trends related to housing and construction, such as expansion of renewable energy; decarbonization of water and sewerage and hot water supply energy; and energy saving, energy creation, and energy storage of buildings, are advancing and, in combination with TOTO initiatives, will lead to achieving a carbon-neutral society in 2050.
<Targets for and Progress in Reducing Total CO2 Emissions from Business Sites (Scope 1 and Scope 2)>
We established 2030 targets for reducing the total CO2 emissions from business sites and have acquired certification for SBT initiatives.
In Scope 1, we have reduced CO2 emissions by approximately 40% in fiscal 2022 through renewal of kilns to cutting-edge models at the Kokura No. 1 Plant (sanitary ware manufacturing).
In Scope 2, the renewable energy introduction rate grew from 15.8% in fiscal 2021 to 46.8 in fiscal 2022 through expansion of electricity generated through renewable energy across all domestic and overseas Group companies.
Regarding the expansion of electricity generated through renewable energy, we are a member of RE100 and are promoting the plan for achieving 100% by 2040. However, we are also considering the possibility of bringing forward these targets.
As a result of these activities, we emitted 267,000 tons of CO2 in fiscal 2022. Accordingly, in terms of our target of reducing emissions by 30% in 2030 (compared to fiscal 2018) based on SBT initiatives, in fiscal 2022 we achieved an approximately 25% reduction compared to fiscal 2018.
Reduction in Total CO2 Emissions from Business Sites: Targets and Progress
<Targets for and Progress in Reducing CO2 Emitted When Product Is Used (Scope 3 Category 11)>
The TOTO Group has formulated 2030 targets for reducing CO2 emitted when a product is used and has acquired certification for SBT initiatives.
In fiscal 2022, we emitted 17,019,000 tons of CO2 through expansion of percentage of sustainable products, improvement of social infrastructure, and other measures. Accordingly, in terms of our target of reducing emissions by 15% in 2030 (compared to fiscal 2018) based on SBT initiatives, in fiscal 2022 we achieved an approximately 7% reduction compared to fiscal 2018.
CO2 Emitted When Product Is Used: Targets and Progress
Participation of Ministry of Economy, Trade and Industry GX League
The GX League is a forum for companies that aims to realize sustainable growth in the current and future society by taking on the challenge of green transformation (GX) in anticipation of achieving carbon neutrality in 2050 and social reforms. The forum is also for cooperation between a group of companies that are making similar efforts, and includes government agencies, universities, and academic institutions.