Response to TCFD

Response to TCFD

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Response to TCFD

The Sinanen Holdings Group has expressed its support for the TCFD (Task Force on Climate-related Financial Disclosures) recommendations to further improve the effect of measures against climate change, which is a key management issue, and participates in the TCFD Consortium, which is a forum for supporting companies and financial institutions to hold discussions.
In addition, by recognizing the various risks caused by the impact of climate change, ascertaining the market changes as well as opportunities and threats from various perspectives, and engaging in efforts to improve efficiency and optimization, we will be able to fulfill our social mission of delivering energy to customers safely and stably, while at the same time contributing towards the reduction of greenhouse gas emissions and mitigating the impact on climate change.

Governance

The Group regards the response to climate change as an important management issue, and has established a Sustainability Promotion Committee chaired by the President and CEO of Sinanen Holdings Co., Ltd.; issues concerning sustainability in general are ascertained across the Group, and discussions are held regarding specific response measures and the setting of targets.
The deputy chairperson of the Sustainability Promotion Committee is the Chief Compliance Officer, who is the chairperson of the Risk Management and Compliance Committee, to enhance the comprehensiveness of risk management for the entire Group, and the members of the committee comprise of the persons in charge at the relevant departments with jurisdiction over Group-wide initiatives, which allows for the strengthened interconnectedness of business.
Details on the discussions and decisions by the committee will be reported to the Board of Directors, which will approve the measures to be implemented by the Group and provide necessary advice.
In addition, the progress of the sustainability initiatives of the Group, including the response to climate change, will be reported to the Board of Directors at least once per year.

Sustainability Promotion System Diagram

Sustainability Promotion System Diagram

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Strategy

The climate change risks and opportunities scenario analysis targets the petroleum business and LP gas business, which occupy over 80% of Group sales (FY 2021 results), due to the size of their expected financial impact.
We set 2050 as the analysis time axis, as this is when migration risks and physical risks will become larger and apparent, and have conducted analysis for the scenarios at both 4°C and 2°C.
For the analysis method, we identified the items that are closely related to the business of the Company from the SDGs targets and TCFD recommended disclosure items, and performed calculations for migration risks and physical risks respectively.
The analysis work was focused on migration risks, which will have a high level of impact on business, and for physical risks, we mainly calculated the level of impact of natural disasters on the real estate owned by the Company.
Risks and opportunities were organized for each item, their timing of occurrence was categorized as short term, medium term, or long term, and their level of impact was categorized as low, medium, and high.

TCFD Category Item Risk Opportunity Timing of Occurrence Level of Impact
Migration
Risks 		Policy and regulation Introduction of carbon taxes and carbon pricing
  • Decrease in demand for fossil fuels due to the introduction of carbon pricing
  • Increase in costs for the procurement of fuel due to the introduction of carbon pricing
  • ー
 Medium to long term High
Setting of decarbonization target
  • Increased credit purchasing costs if target not achieved
  • Increased profit from credit sales if target is achieved
 Medium to long term High
Market

Changes in energy mix / changes in energy prices
  • Increased energy procurement costs due to transportation expenses
  • Decreased demand due to soaring energy prices
  • Increased profits of the renewable energy business
  • Increased sales of petroleum alternative fuels

Short to medium term

High

Increased market share of carbon-free products
  • Decrease in demand for gasoline due to the spread of electric vehicles and hydrogen vehicles
  • Promotion of LPG low carbon fuel

Short to medium term

Medium
Technology Introduction of new decarbonization and low carbon technology
  • Decreased sale of petroleum, etc., due to the spread of decarbonized materials such as bioplastics
  • Increased costs for introducing equipment such as environmentally-friendly vehicles
  • Decreased costs in conjunction with improved fuel efficiency of environmentally-friendly vehicles and improved distribution efficiency
  • Reduction of transportation costs through the introduction of smart meters and the improvement of delivery efficiency

Short to medium term

Medium to high
Risk in investing in the development of new technology
  • Increased investment costs and obsolescence of investment targets in renewable energy, etc., investments
  • Increased profits from investments in renewable energy, etc.
 Medium to long term

Medium
Reputation

Changes in demand due to consumer preference for carbon-free
  • Increased funding costs due to acceleration in divestment from oil and gas business
  • ー

Medium to long term

Low

Increased amount of concern from stakeholders
  • Increased response costs due to increased demand for action against climate change
  • ー

Medium to long term

Low to medium
Physical
Risks		 Acute risks Occurrence of flood damage due to typhoons and heavy rains
  • Increased damage recovery costs, countermeasures costs, and insurance premiums for owned assets
  • Decreased revenue due to reduction in days when business can be conducted and restrictions on use
  • Increased costs in conjunction with delivery delays and larger number of accidents
  • Impact of supply chain division on business continuity
  • Decreased asset value of properties located in areas with high flood risk
  • Increased LP gas stockpile due to lifeline division

Short to medium term

 Medium
Chronic risks

Rise in sea levels
  • Flooding of factories and facilities located in bay areas, etc.
    Property relocation costs
  • ー

Medium to long term

 Low
Rising average temperature
  • Decreased demand for gas in conjunction with increases in average temperature and water temperature
  • ー

Medium to long term

 Low

In regard to following materialities selected in the assessment of risks and opportunities that have a high level of impact, we selected relevant scenarios and parameters, and evaluated the financial impact for each scenario at 4°C and 2°C respectively.
In regard to the materiality items specified by the scenario analysis, we will improve strategic resilience through the reflection of these in the formulation of our long term vision and medium-term management plan, in order to minimize the risks and to maximize the opportunities.

Materialities with High Impact

Changes in sales due to climate change Changes in costs due to climate change
Decreased sales due to decreased demand
  • Soaring energy price due to the introduction of carbon taxes and carbon pricing, and decreased demand for energy due to this
  • Decreased demand in conjunction with the spread of hydrogen and electric vehicles, etc.
  • Decreased demand for petroleum, etc., in conjunction with the spread of decarbonized materials
  • Decreased demand for gas in conjunction with increased temperatures and water temperatures
Increased costs in conjunction with the introduction of carbon taxes and carbon pricing
  • Increased costs due to the introduction of carbon taxes and carbon pricing
  • Increased carbon credit costs in conjunction with the non-achievement of carbon emissions
Increased sales in the renewable energy business Increased transportation expenses
  • Increased transportation costs in conjunction with soaring energy prices (gasoline, light oil, etc.)
  • Increased transportation costs due to the passing of capital investment in EV vehicles and transport costs on to price
Increased sales of fossil fuel alternatives Increased capital investment 　
  • Increased equipment costs in conjunction with water damage from floods and typhoons, etc.

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Risk Management

The Group collects and analyzes information on a wide range of risk factors, such as climate change-related regulations and the impact on business. The important opportunities and risks that should be kept in mind are assessed and specified at the Sustainability Promotion Committee, and are supervised and monitored by the Growth Strategy Department, which is the committee's secretary office.
In addition, the Chief Compliance Officer concurrently serves as the deputy chairperson of the Sustainability Promotion Committee and the chairperson of the Risk Management and Compliance Committee, which allows for the sharing of issues between the two committees and the integrated performance of risk management across the organization.

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Indicators and Targets

The Group has set the two indicators of GHG emissions and carbon productivity for the assessment and management of climate change risks and opportunities, and will simultaneously realize business growth and reduced GHG emissions.

Indicator Target Target Scope
(1) GHG emissions Reduction of GHG emissions Scope1+2
(2) Carbon productivity Business growth and increased carbon efficiency Scope1～3

Indicator (1) GHG Emissions

Upon having calculated the overall emissions of Scope 1 to 3, we set targets for reduction with a focus on Scope 1 and Scope 2, for which there is significant margin for reductions through our own efforts.

Subject Fiscal Year Reduction Target
FY 2030 Scope 1 + Scope 2 50％ reduction (compared to FY 2016)
FY 2050 Scope 1 + Scope 2 carbon neutral (substantially zero emissions)

Specific Initiatives

Specific Initiatives

Indicator (2) Carbon Productivity

As an index of achieving not only financial expansion (sales, profits, etc.), but also decarbonization of the entire supply chain on the basis of cooperation with stakeholders, carbon productivity (i.e. measurement of productivity per ton of GHG emissions) will be adopted.

Carbon productivity = gross profit / GHG emission. The aim is to convert to a business structure appropriate to a decarbonized society, i.e. with lower GHG emission and higher profit generated.

Subject Fiscal Year Target
FY 2027 Scope 1 to 3 6.0% increase in the entire supply chain (compared to FY2016)

Specific Initiatives

Specific Initiatives

GHG Emissions (Scope 1 to Scope 3)

Category Definition Details for the Group GHG Emissions (t)
FY2016
(base year)		 FY2020 FY2022
Scope1 Direct emissions from in-house operations Upstream and downstream transportation of LP gas 2,943 2,565 2,349
Use of LP gas in in-house operations 2,924 2,541 2,309
Scope2 Indirect emissions from heat and electricity Electricity consumption in offices, etc. 3,456 2,577 2,143
Subtotal (Scope 1 and Scope 2) 9,323 7,682 6,800
Scope3 category1 Purchased products and services Stocking of LP gas and petroleum products, purchasing of consumables, etc. 1,379,700 1,194,252 1,185,297
category2 Capital goods Manufacture and construction of fixed assets owned 8,443 4,755 6,614
Category3 Fuel, etc. not included in Scopes 1 and 2 Use of electricity in upstream and downstream processes 173,088 942,736 1,592,889
category4 Transportation and delivery (upstream) Upstream and downstream delivery of petroleum products 112,352 98,177 92,889
category5 Waste generated from business Waste generated from business 326 415 464
category6 Business trips Employee business trips 725 377 640
category7 Employee commuting Employee commuting 344 270 304
category11 Use of sold products Use of LP gas and petroleum products 7,984,991 6,968,882 6,889,369
Total 9,669,292 9,217,547 9,775,265

*Sinanen Holdings Co., Ltd., Sinanen Co., Ltd., and Melife companies Scope of Report (GHG emissions are calculated only for petroleum, gas, and electricity businesses)　

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