Climate-related Financial Information Disclosure（TCFD）
Strategy
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Impact on the Organization's Business, Strategy, and Finances of Climate-related Risks and Opportunities
As the physical impacts of climate change materialize and the global environment continues to substantially change, this will likely cause turmoil in the economic and financial sectors. Konica Minolta recognizes these to be significant risks to its business. At the same time, the company believes that, by helping to solve environmental issues through business activities, opportunities can be created that will promote the sustainable growth of the Group.
By actively introducing cutting-edge technology and combining it with Konica Minolta's strengths in imaging IoT technology and digital input and output, the Group is transforming itself into a digital company that creates solutions which contribute to solving social issues including climate change. In the long-term management vision formulated in fiscal 2020, “addressing climate change” was designated as one of the material issues and achieving Carbon Minus status by 2030 was set as a target. As Konica Minolta’s offerings to clients shift from products to services, it aims to reduce CO2 from services as well as CO2 emissions from its products and turn this into business growth. By backcasting from this target and linking the medium-targets and annual plans on climate change measures to medium-term business plans for product planning, development, production, procurement and plans, Konica Minolta aims to achieve its Carbon Minus target while continuing to develop its business.
Implementation and Results of Climate Change Scenario Analysis
The Paris Agreement is a framework for addressing climate change that seeks to move the world more quickly and ambitiously to a low-carbon model. At the same time, there are concerns that the needed changes will not happen fast enough and climate change will have a harsh impact on the world.
Konica Minolta is forecasting using both optimistic and pessimistic scenarios, as described below. It is identifying business risks that could adversely affect the performance of the Group in the future as well as business opportunities that can be created by proactively addressing the challenges of climate change.
Konica Minolta utilizes the framework described below to conduct scenario analysis, employing a process that involves identifying target business areas, This process includes identifying major climate-related risks and opportunities, reviewing existing scientific scenarios for climate change, reviewing and clearly defining risks and opportunities for those scenarios as well as their financial impacts, and reviewing the direction, policies, and strategies for future responses. The climate financial impacts identified by the scenario analysis are reported and discussed at the Environment Promotion Committee, which includes representatives of the 17 core businesses and divisions of the Konica Minolta Group, and then approved by the General Manager of the Corporate Environmental Operations, who indicates and formulates the direction, policies, strategies and measures for future responses.
- Scientific scenarios used: IPCC RCP2.6, RCP8.5 IEA 2DS, CPS
- Classification of risks and opportunities: Transition risks (policies and laws, technologies, markets, reputation), physical risks (acute physical, chronic physical), opportunities (resource efficiency, energy, products/services, markets, resilience)
- Definition and evaluation criteria for “financial impact”: “Large”: additional cost or profit decrease of 1 billion yen or more, “Medium”: additional cost or profit decrease of 100 million yen to 1 billion yen, “Minimal”: additional cost or profit decrease of less than 100 million yen
- Definition and evaluation criteria for “financial impact”: “Large”: Profit of 10 billion yen or more, “Medium”: Profit of 1 to 10 billion yen, “Minimal”: Profit of less than 1 billion yen
- Definition and evaluation criteria for time horizons: Long-term: 10 years or more, Medium-term: 3 to 10 years, Short-term: 1 to 3 years
If the average global temperature increase is kept below 2°C and a low-carbon global society is achieved:
If the world as a whole moves toward becoming low-carbon and environmental laws and regulations become even stricter in the near future, including greenhouse gas emission regulations, energy efficiency regulations, regulations relating to Europe's Circular Economy Action Plan, and new and additional laws and regulations such as carbon taxes, the Group may face additional obligations and costs related to legal compliance. This might result in higher costs and loss of business opportunities. Also, if Konica Minolta fails to respond in a timely and appropriate manner to growing demands from stakeholders for the procurement of renewable energy, it is possible that investments, loans and sales opportunities could be lost, and the corporate brand image could also be damaged. The interests of society and customers are also changing with the focus on curbing the impact of climate change, and the decline in the use of paper in offices and higher costs for manufacturing and procurement as fossil fuels and fossil resources are replaced with alternatives could also affect the Konica Minolta Group’s earnings.
Konica Minolta is striving for more efficient production processes, developing and improving its production technologies, and promoting Sustainable Factory activities that reduce both CO2 emissions and costs. In addition, Konica Minolta believes that, in order to compete as a sustainable growth company, it must be able to build business structures that do not depend on fossil fuels quickly. Accordingly, it is a member of RE100, a global leadership initiative in which companies aim to operate their businesses using renewable energy-derived electricity exclusively. Under its RE100 commitment, Konica Minolta has set a goal of procuring all the electric power used for its business activities from renewable energy sources by 2050. Beginning with Konica Minolta production and sales bases in Europe, North America, and China, where the use of renewable energy-derived electricity is relatively widespread, the Group is gradually reviewing its electricity purchase contracts and switching to renewable energy-derived electricity.
In addition, as part of its efforts to reduce CO2 emissions at its suppliers, the Group is promoting DX Green Supplier Activities, in which it digitizes the technologies and know-how of its energy conservation experts and provides them to it suppliers as an energy-saving diagnosis package, so that they can work together with the Group to reduce energy consumption. Through these activities, the Group is reducing energy costs and CO2 emissions throughout its supply chain. In FY2021, DX Green Supplier Activities evolved into an activity to make the supply chain carbon neutral, and a new Carbon Neutral Partner Certification System was established and put into operation. Konica Minolta will support the decarbonization of its suppliers by manufacturing goods with as little energy as possible using the digitized energy-saving diagnosis package, and then use the remaining energy from renewable sources. Over an activity period of three years, the Group will reduce CO2 emissions by 6% through energy conservation, and then convert to 100% renewable energy-derived electricity.
The Group actively supports its suppliers in reducing CO2 emissions so that they can become the “carbon neutral” companies of choice for their customers and investors. If the Group can gradually expand this effort to achieve carbon neutrality throughout the supply chain, it can not only address transition risk, but also improve its sales competitiveness based on a strong supply chain and create new business opportunities.
Konica Minolta believes that accelerating the transition to a low-carbon society should create new business opportunities.
In the medium- and long term, in anticipation of growing demand for ways of sharing information that replace paper, Konica Minolta will transform its existing MFP business into an "as a Service" model (high value-added services based on products and DX). The Group will also establish a proprietary platform business that combines its intangible assets (customer contacts, technology, and human resources) with the latest IoT and AI technologies—areas in which have an advantage—to significantly reduce energy load and greenhouse gas emissions and meet growing public expectations for a decarbonized society.
In the medium term, if Konica Minolta can respond to changes in customer demand and preferences, it could also increase sales. This might include digital workplaces that support the transition to a full-scale paperless society, on-demand production processes that transform the business model of mass production and disposal to one that restrains wasteful production, connected workplaces that do not rely on paper output and support diverse workstyles, and material processing innovation solutions that curb energy and resource usage. It could also involve technology for imaging IoT solutions for non-destructive inspection of greenhouse gas leaks from shale gas and other pipelines, as well as an ecosystem to support the environmental (sustainability) management of companies and technologies using and producing renewable plastic and bio materials to help curb new resource extraction.
From a short-term perspective, Konica Minolta believes that active promotion of ongoing energy saving activities will reduce costs at its own factories. Not only that, it will create new business opportunities through collaboration with suppliers and business partners.
Addressing the "Risks" of Climate Change
| Impact on Konica Minolta | Target Sector | Classification | Financial Impact | Timeline | Handling | |
|---|---|---|---|---|---|---|
| procurement and manufacturing costs | Stakeholder demand for renewable energy procurement | Industry Office equipment | Market evaluation | Medium | Short-term | Introduce renewable-energy-derived electricity at production, R&D, and sales sites |
| Replacing fossil resources and fuels in production | Industry | Policies/Laws | Medium | Long-term | Examine the introduction of CO2-free fuels | |
| Response to new emissions regulations and laws | Industry | Policies/Laws | Medium | Short to medium term | Develop energy-saving production technology | |
| Increase in product development costs | Response to the market and new regulations on product energy efficiency | Office equipment | Policies/Laws Market | Medium | Short-term | Product energy-saving design in keeping with new environmental labeling standards, compliant with public procurement and bidding requirements |
| Decrease in sales due to changes in demand for products and services | Decrease in office demand due to acceleration toward a paperless society | Office equipment | Market | Strong | Short to medium term | Convert business to paperless operation |
| Decline in product competitiveness due to unsustainable use of resources and non-reusable design. | Office equipment | Policies/Law Evaluation |
Medium | Medium term | Utilize recycled materials, product 3R design | |
Addressing the "Opportunities" of Climate Change
| Impact on Konica Minolta | Target sector | Classification | Financial Impact | Timeline | |
|---|---|---|---|---|---|
| Higher sales due to change in demand for products and services | Edge computing, reducing need for data centers | Office equipment Industry | Products/Services | Strong | Medium-term |
| On-demand production process to restrain wasteful production | Office equipment | Products/Services | Strong | Short- to medium -term | |
| Connected workplaces that support diverse work styles | Office equipment | Products/Services | Strong | Short- to medium -term | |
| Solutions for material processing process transformation to reduce energy use | Industry | Products/Services | Medium | Short- to medium -term | |
| Leakage inspection system of pipelines including those carrying shale gas | Industry | Products/Services | Minimal | Short- to medium -term | |
| Ecosystem that supports corporate environmental and sustainability management | Environmental management | Products/Services | Minimal | Short- to medium -term | |
| Technology for upgrading recycled plastics | Office equipment | Products/Services | Minimal | Short- to medium -term | |
If the average global temperature increase exceeds 2°C and the predicted physical effects of climate change materialize:
If physical risks due to climate change materialize around the world, such as abnormal climate events and forest fires, stricter restrictions designed to protect forest resources, and heightened social demands could affect Konica Minolta by destabilizing the procurement of paper materials, resulting in the loss of business opportunities. Also, if chronic climate change effects were to continue, such as altered weather patterns, procurement of natural resources might become problematic, and the supply of raw materials could be reduced or halted. This could have an impact on the utilization of factories. Moreover, major climate disasters such as large-scale typhoons or floods could occur due to climate change, and these could damage the Konica Minolta Group’s facilities and labor environment, making it difficult for employees to perform their jobs. As a result, operations of the Group and its suppliers might be temporarily halted, which could disrupt the supply chain, and production and shipping could be delayed.
In Konica Minolta's core office equipment business, the Company is accelerating the expansion of its Digital Workplace Business, which provides new digital solutions, as well as its MFP business, which requires paper output, and transforming its business portfolio.
Specifically, the Company will increase the percentage of its businesses that provide solutions tailored to each industry and type of business, of which business transformation support services for local governments is a leading example. Moreover, as the procurement of natural resources may become unstable, and the supply of raw materials could be restricted or temporarily suspended and affect the operation of factories, the Company is working to secure multiple suppliers and examining alternative materials for raw materials that face right risk when it comes to securing stable supply.
To better respond to climate-related natural disasters, the Company is expanding its own multiple production sites in Europe and North America as bases for producing and filling printing toner and producing parts for consumables needed in the mainstay office and professional printing business areas. The Company is working to establish highly resilient supply chain systems that produce and supply products in the regions where they are needed. At Konica Minolta’s production sites and those of its major suppliers, the Company conducts a yearly analysis using Aqueduct, a comprehensive water risk assessment tool developed and provided by the World Resources Institute (WRI). The Company is systematically taking measures to address water risks by identifying sites that have been evaluated as having high water risk.
Moreover, Konica Minolta has prepared a Business Continuity Plan (BCP), a specific action plan for ongoing operations in the event that large-scale natural disasters occur. From a worldwide perspective that encompasses the entire supply chain, systems are set up for each business division and subsidiary, including the mainstay information equipment business and the medical equipment business, which will be in great demand in the event of a disaster. In addition, an initial response system has been set up, and this system will collect information on the extent of damage and other aspects immediately after a disaster and determine whether the BCP should be activated.
On the other hand, the physical impacts of climate change could also create business opportunities.
In the medium and long term, based on the expectations for increased safety and security in the face of natural disasters, Konica Minolta’s solutions business can tap into societal demand for imaging IoT and sensing solutions to prevent the effects of abnormal weather and natural disasters and ensure preventive maintenance of infrastructure, as well as healthcare solutions that utilize radiography and ultrasound diagnostic imaging, which can be used at disaster medical care sites where demand is high.
Addressing the "Risks" of Climate Change
| Impact on Konica Minolta | Target sector | Classification | Financial impact | timeline | Handling | |
|---|---|---|---|---|---|---|
| Lower revenue due to a reduction in production capacity | Insufficient or interrupted supply of natural resources due to changes in climate patterns | Industry ー | Chronic physical | Strong | Long-term | Product development not dependent on particular natural resources |
| Supply chain interruptions following large-scale natural disasters | Office equipment | Acute physical | Strong | Medium-term | Establish business continuity management (BCM), decentralize production and supply of consumables by region, production system independent of people, location,, country, and fluctuations | |
| Depletion of water resources and restrictions on water intake | Office equipment | Chronic physical | Minimal | Long-term | Water risk assessment and reduction of water consumption at production and procurement sites | |
| Decrease in sales due to changes in demand for products and services | Limited access to forest resources due to abnormal climate and forest fires | Office equipment | Chronic physical | Strong | Long-term | Turn the shift to paperless into business opportunity |
Addressing the "Opportunities" of Climate Change
| Impact on Konica Minolta | Target sector | Classification | Financial impact | Timeline | |
|---|---|---|---|---|---|
| Increase in sales due to changes in demand for products and services | Image IoT and sensing solutions that contribute to disaster prevention and the mitigation of abnormal climate and natural disasters | Industry | Products/Services | Medium | Medium-term |
| Healthcare solutions utilizing diagnostic imaging at disaster medical sites | Healthcare | Products/Services | Minimal | Medium-term | |
Climate-related risks and opportunities for Konica Minolta
Based on the scenario analysis results, the Company has formulated a business plan to anticipate business growth centered on DX by shifting from a conventional product sales model focused on MFPs, which account for a high percentage of sales, to an "as a Service" model.
The Board of Directors approved the establishment of "addressing climate change" as one of the five material issues to be addressed by Konica Minolta in its long-term management vision and also approved moving forward the date for achieving Carbon Minus status to 2030 with the goal of addressing climate change.
To achieve an early transition to a low-carbon society, the Company is considering moving its target dates further forward for the reduction of CO2 emissions over the product lifecycle, contribution to CO2 reductions, and the renewable energy-derived electricity utilization rate.
