Initiatives to Address Climate Change
Sapporo Holdings endorses the recommendations of the TCFD, which encourages companies to assess, manage, and disclose information on the risks and opportunities of climate change, and is actively promoting information disclosure.
Recognizing that addressing climate change is one of the most important issues to be addressed on a global scale, we are working to resolve issues from both mitigation and adaptation perspectives. We have identified risks and opportunities based on scenario analysis of multiple possible future business environments, and are reflecting the results in our strategies and initiatives.
Governance
Sapporo Group has established the Group Sustainability Committee, chaired by the President and Representative Director of Sapporo Holdings, as an advisory body to the Management Council* to promote and oversee environmental conservation activities for the entire Group and to support the environmental management initiatives of each operating company.
The Group Risk Management Committee is incorporated into the overall risk management, and the committee secretariat reports semiannually to the Board of Directors on the occurrence of risks, including those related to water risk and climate change, and how to respond to them, as well as how to prevent their recurrence. The Sustainability Committee formulates overall policies to promote sustainability management throughout the Group, coordinates within the Group, and the director in charge reports semiannually to the Board of Directors on progress in addressing climate change-related issues. The Board of Directors monitors and supervises the efforts to address these reported issues and the targets set.
(note) Corporate governance and internal control
Strategy
Sapporo Group formulated the Sapporo Group Environmental Vision 2050 in 2019 with the aim of realizing a decarbonized society, and is working to prevent global warming by reforming its business structure with a decarbonization orientation, thoroughly implementing energy-saving measures, and utilizing renewable energy.
In this context, in our core beer business, we have been breeding our own barley and hops, the main raw materials, since our founding in 1876, and have adopted a unique raw material procurement system called "cooperative contract farming" since 2006. In the future, assuming the impact of each of the scenarios described below on the yield of raw materials, we will work to develop new varieties and ensure stable procurement in cooperation with universities, research institutions, and suppliers in Japan and overseas, based at the Sapporo Brewery Material Development Laboratory. We will also strengthen cooperation with suppliers to ensure stable procurement of corn and rice as secondary materials.
We will take on the challenge of resolving climate change issues from the perspectives of mitigation and adaptation* through our group-wide efforts to thoroughly decarbonize and our efforts to produce raw materials, which we have cultivated over 140 years in the beer business, aiming to become a resilient corporate entity and contribute to the building of a sustainable society.
* Mitigation: Curbing the emission of greenhouse gases
Adaptation: Adjusting the nature and human society to cope with the effects of global warming (from Ministry of the Environment data)
Scenario Analysis
A scenario analysis was conducted for the procurement area of agricultural products used as raw materials for beer, which is expected to be affected by climate change in the core beer business. Based on scenario analysis data from the Food and Agriculture Organization of the United Nations (FAO) and other sources, the analysis was corrected to take into account factors such as extreme weather events, and assumed changes in yields up to 2050 for three scenarios that differ in climate change factors, economic and social factors, and factors related to production volume.
| Temperature increase | Extreme weather events (typhoons, floods, droughts, etc.) | Agriculture-related trends | Other social trends | |
|---|---|---|---|---|
| Sustainability Progress scenario | Possible to keep it below 2°C | Increase to some extent (-) | Tighter regulations on the use of chemical fertilizers, etc. (-) | Population growth, improved living standards, increased demand for food, and some increase in food prices |
| Sustainability Standard scenario | Impossible to keep the temperature below 2°C | Increased frequency and damage (-) | Increase in variety improvement and capital investment (+) | Population growth, higher living standards, increased demand for food, higher food prices |
| Sustainability Stagnation scenario | Much higher than 2°C | Severe increase (-) | Increase in crop diseases and damage to agriculture (-) | Higher food prices, more difficult access to food for the poor |
+: Positive impact on yields -: Negative impact on yields
Projected changes in yields in major sourcing countries
The sustainability progress scenario assumes a negative impact on yields due to the impact of restrictions on the use of chemical fertilizers. In countries where yield estimates are on an upward trend, yields may increase or remain flat despite the negative factors in the table above.
Barley
| Progress | Standard | Stagnation | |
|---|---|---|---|
| Europe |  |
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| North America | |
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| Oceania | |
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| East Asia | |
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Hop
| Progress | Standard | Stagnation | |
|---|---|---|---|
| Europe | |
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| North America | |
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| Oceania | |
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| East Asia | |
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Corn
| Progress | Standard | Stagnation | |
|---|---|---|---|
| North America | |
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| South America | |
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Rice
| Progress | Standard | Stagnation | |
|---|---|---|---|
| East Asia | |
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- : >5%
- : ±5% or less
- : <-5%
It indicates whether the estimated yield in 2050 is increasing (↑), remaining flat (→), or decreasing (↓) compared to the yield in 2018.
Financial Impact Analysis
Impact on Raw Agricultural Commodity Procurement
In 2023, based on the results of the above scenario analysis, we conducted a financial impact analysis on the following items expected to have a significant impact on the procurement cost of raw materials. This analysis is based on the total procurement in the fiscal year 2022, calculating only the price increase due to climate change-related impacts.
Expansion of Organic Cultivation Due to Strengthened Environmental Regulations
We are calculating the financial impact in the scenario where the use of chemical fertilizers and pesticides is restricted, and organic cultivation becomes widespread globally.
In organic cultivation, price increases are expected due to reasons such as 'reduced yield,' 'increased labor costs for weed control and pest management,' and 'cost increases due to the switch to organic fertilizers and natural pesticides instead of chemical fertilizers and pesticides.'
The price increase was estimated by calculating the rate of increase in raw material prices derived from organic cultivation, based on market price data for conventional and organically cultivated products, and projecting the incremental cost.
Rising Procurement Costs Due to Soaring Energy Prices
We are estimating future energy prices based on the 'World Energy Outlook' released by the International Energy Agency (IEA). The percentage of energy prices in production costs for each raw material has been calculated, and the impact of the increase in energy prices on production costs has been assessed. Additionally, we have calculated the influence of the rise in energy prices on fertilizer manufacturing costs, reflecting this impact in the production costs of raw materials.
Increase in Raw Material Prices Due to Decreased Yields of Ingredients (Barley, Hops, Corn)
We referred to forecast data on past changes in raw material yields and literature on the impact of climate change on crops to estimate the amount of impact. We set the rate of price increase based on the decrease in yield and estimated the raw material prices accordingly.
Summary of Analysis Results
By Scenario: Increase in Raw Material Prices Due to Climate Change (Compared to 2022)
(Unit: hundred million yen)
| 2030 | 2050 | |
|---|---|---|
| Progress scenario | 2.0 | 5.5 |
| Standard scenario | 1.3 | 5.0 |
| Stagnation scenario | 2.5 | 7.7 |
The scenario with the most significant financial impact in each case was the Stagnation Scenario. In the Stagnation Scenario, the impact of 'Rising Procurement Costs Due to Soaring Energy Prices' was the most substantial, resulting in an impact of 250 million yen in 2030 and 770 million yen in 2050 due to 'Increase in Raw Material Prices Due to Decreased Yields of Ingredients.'
The next scenario with significant impact was the Progress Scenario, where the effect of 'Expansion of Organic Cultivation Due to Strengthened Environmental Regulations' resulted in an impact of 200 million yen in 2030 and 550 million yen in 2050.
In the Standard Scenario, the impact of 'Increase in Raw Material Prices Due to Decreased Yields of Ingredients' and 'Expansion of Organic Cultivation Due to Strengthened Environmental Regulations' led to an impact of 130 million yen in 2030 and 500 million yen in 2050.
Financial Impact Results by Item
By Item: Increase in Raw Material Prices Due to Climate Change (Compared to 2022)
When looking at each item separately, barley (including malt), which has the highest procurement amount, became the item with the highest price increase in each scenario. In the Progress Scenario, the impact on each item is linked to the size of the procurement amount, but in the Standard and Stagnation Scenarios, corn, with the smallest procurement amount, became the second-highest in terms of price increase. This is because both the Standard and Stagnation Scenarios anticipate a significant decrease in corn yield, which is expected to have a substantial impact.
Impact of carbon tax on Scope 1 and 2
The financial impact of introducing a carbon tax was calculated based on the International Energy Agency's Net Zero Emissions (NZE) scenario, considering the energy consumption at our company's facilities. We analyzed the financial impact at the points of 2030 and 2050, examining the scenarios where our company could achieve and could not achieve its CO2 reduction targets.
| Year | Emissions if greenhouse gas reduction targets are achieved (thousand tons) |
Emissions if greenhouse gas reduction targets are not achieved (thousand tons) |
Cost related to carbon tax if greenhouse gas reduction targets are achieved (thousand yen) |
Cost related to carbon tax if greenhouse gas reduction targets are not achieved (thousand yen) |
|---|---|---|---|---|
| 2030 | 110 | 189 | 1,813,440 | 3,130,869 |
| 2050 | 0 | 189 | 0 | 6,055,178 |
1USD=130 yen
IEA: NZE Scenario
Carbon tax 2030: 130 USD for developed countries, 90 USD for emerging countries, 15 USD for developing countries
Carbon tax 2050: 250USD for developed countries, 200USD for emerging countries, 55USD for developing countries
Based on the IEA's NZE scenario, we have calculated the financial impact related to the carbon tax for 2030 and 2050.
If emissions are reduced as planned, we assume 110 thousand tons and 0 tons in 2030 and 2050, respectively. On the other hand, if the reduction target is not achieved, emissions in 2030 and 2050 are estimated to be 189 thousand tons each, assuming that the emissions in 2022 will continue. Comparing the case where the reduction target is not achieved and the case where it is achieved, the impact in 2030 is approximately 1.3 billion yen and in 2050 is approximately 6 billion yen.
Risks and Opportunities, Direction of Responses and Measures
According to the results of the scenario analysis, there are areas where yields would decrease in each scenario. Including these impacts, we examined the risks and opportunities facing the Sapporo Group, assuming that the three scenarios become reality.
In terms of risks, we recognize that crop yields could decrease due to abnormal weather, regulations could be tightened, and quality could decline due to pests and diseases. On the other hand, in terms of opportunities, we recognize the stabilization of quality through improved varieties, the development of new varieties, and the enhancement of competitiveness through product development, etc. We believe that by strengthening mitigation and adaptation measures, the impact of risks will be reduced and the potential for capturing opportunities will be greater.
Although the trend of declining yields will occur in each region, we will respond to regional differences by securing diversified sources of procurement. In addition, we will respond to tighter regulations on agricultural chemicals, yield reduction and quality deterioration caused by diseases through “Collaborative Contract Farming System” activities and the development and commercialization of new varieties. These are measures that will be effective in all scenarios.
| Item | Risk and Opportunity | Impact Period | Financial Impact | Direction of response and measures | |||
|---|---|---|---|---|---|---|---|
| Short-term | Medium-term | Long-term | |||||
| Risks | Transition risks | Increased energy costs at business sites due to the introduction of carbon pricing | 〇 | 〇 | Imposition of carbon tax NZE Scenario (Progress Scenario): 3.13 billion yen in 2030, 6.06 billion yen in 2050 |
Promotion of decarbonization efforts (achievement of targets for 2030 and 2050) | |
| Decrease in agricultural yields due to tighter environmental regulations on pesticides (including chemical fertilizers) Increase in agricultural production energy costs due to factors such as carbon pricing |
〇 | 〇 | Increased procurement costs for raw agricultural products Progress Scenario: 200 million yen in 2030, 550 million yen in 2050 Standard Scenario: 130 million yen in 2030, 500 million yen in 2050 Stagnation Scenario: 250 million yen in 2030, 770 million yen in 2050 * Calculation based on the 2022 actual performance standard for beer raw agricultural products |
Understanding pesticide regulation information and pesticide usage conditions Gathering information on integrated pest management, including biological control and physical removal methods in place of chemical pesticides, and understanding of producer trends |
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| Physical risks | Deterioration of raw agricultural product quality and yield Reduction due to global warming and abnormal weather events | 〇 | 〇 | Ensuring diverse procurement sources Development and promotion of barley and hop varieties with low risk of quality deterioration due to abnormal weather and high yield Development and diffusion of new barley and hop varieties with excellent disease resistance Establishment of a pest control system for the introduction of integrated pest management in cooperation with suppliers |
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| Water scarcity and flooding at business sites due to abnormal weather events (heatwaves, droughts, wind and water damage from typhoons and concentrated heavy rainfall, etc.) (*) | 〇 | 〇 | 〇 | ー | Safety of water supply at existing sites and risk assessment for drought and extreme weather | ||
| Stagnation in procurement of raw materials due to epidemics of new infectious diseases. | 〇 | 〇 | ー | Collection and understanding of information on global trends and regulations in food import and export Strengthen foundations for stabilizing domestic production |
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| Opportunities | Strengthening competitiveness through the development of raw agricultural products and product development | 〇 | 〇 | ー | Development and commercialization of barley and hop varieties adapted to avoid or reduce the effects of climate change such as drought and heavy rainfall | ||
| Efficiency improvement in agriculture through the utilization of ICT, robots, etc. Stabilization of quality through breeding |
〇 | 〇 | ー | Utilization of new technologies in agriculture through collaboration with domestic and international partners | |||
Transition Plan
Mitigation Measures: Plan to 2030 (Scope 1, 2)
The Sapporo Group is committed to achieving targets for greenhouse gas reductions at the SBT Initiative certification level. The SBT 1.5℃ standard defines the level of reduction each year toward the target year, and we aim to achieve a certain degree of reduction throughout the Group.
To achieve this reduction plan, we will invest approximately 2.1 billion yen in decarbonization over the eight-year period from 2022 to 2030. At production sites, we will promote energy-saving activities such as upgrading to high-efficiency equipment and streamlining processes in line with measures to address aging facilities, as well as a shift to renewable energy, mainly for electricity. For the framework of investment decisions for decarbonization, Internal Carbon Pricing (ICP) has been introduced at major operating companies, and the estimated investment amount of 6,000 yen/t-CO2 has been adopted for the current investment.
Adaptation Measures Plan to 2050
| Year | Barley | Hops |
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| 2023 |
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| 2024 |
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| 2025 |
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| 2026 |
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| 2027 |
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| 2028 |
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| 2029 |
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| 2030 |
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| 2031-2034 |
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| 2035 |
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| 2036 |
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| 2050 |
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In our core alcoholic beverages business, the Sapporo Beer Ingredient Development Laboratory serves as a base for developing new breeds in collaboration with universities, research institutes, and suppliers in Japan and overseas. For the main materials of beer, which are expected to be greatly affected by climate change, we are developing breeds with excellent disease resistance and stable yield and quality even in abnormal weather conditions, and aiming for their commercialization.
Indicators and Targets
Among the measures and policies described in the previous section, the following indicators and targets have been set for the initiatives that the Sapporo Group is particularly focusing on.
In mitigation measures such as curbing greenhouse gas emissions, the Sapporo Group has set medium- and long-term targets for reducing CO2 emissions. In the value chain target among them, we have newly determined reduction activities in cooperative cultivation areas in Japan as one of the specific initiatives to be implemented in the future. We will expand our initiatives to domestic cultivation areas, taking into account pesticide and other regulations.
For adaptation measures to avoid or mitigate damage from climate change impacts, we have set new targets for agricultural products used as key ingredients in our core product, beer. We aim to develop and commercialize breeds that can address issues of yield reduction and quality deterioration caused by abnormal weather conditions such as drought and heavy rainfall, as well as water stress and disease caused by such conditions.
Mitigation measures
2030
- Reduce greenhouse gas emissions (Scope 1 and 2) from our sites by 42% compared to the 2022 levels
- Reduce greenhouse gas emissions (Scope 3) throughout the value chain by 25% from the 2022 levels
- Reduce greenhouse gas emissions in FLAG scopes 1, 2, and 3 by 31% from the 2022 levels
- Expand our emission reduction activities in all domestic cooperative cultivation areas
2050
- Aim to achieve net zero greenhouse gas emissions in Scope 1, 2, and 3
- Use 100% renewable energy sources for electricity consumption
Adaptation measures
- Apply for registration of new breeds (barley, hops) to adapt to climate change by 2030
- Commercialize new breeds (barley, hops) to adapt to climate change in Japan by 2035
- Develop new environmentally adaptable breeds besides the above breeds and commercialize them in Japan and abroad by 2050
Targets for other items related to climate change have been set in the Medium- and Long-term Targets for Key Sustainability Issues, and our group-wide efforts are being promoted to achieve these targets.
We will continue to strive to understand and disclose information on risks and opportunities that have not yet been fully analyzed, countermeasures to address them, and their financial impacts. We will also conduct reviews as necessary in response to changes in social conditions.
Sapporo Group Environmental Vision 2050
- Sapporo Group Basic Environmental Philosophy and Basic Policy
- Sapporo Group Environmental Vision 2050
- Environmental Conservation Promotion System
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Initiatives to Address Climate Change