The Nishitetsu Group recognizes that preservation of the global environment is an important issue in order to contribute to the realization of a sustainable society and to be a company that is trusted by society and continues to grow over the long term.
To this end, we have established the “Nishitetsu Group Environmental Policy” with the aim of reducing our environmental impact through business activities in harmony with the environment and contributing to the realization of a recycling-oriented society and the control of global warming, and have been implementing activities to reduce our environmental impact.
The Group is engaged in a variety of businesses, including transportation, such as the bus and railroad businesses, real estate, such as the leasing and housing businesses, and distribution, and each of these businesses requires a specific response.
In March 2022, we endorsed the TCFD recommendations and disclosed information on our bus business, which accounts for approximately 50% of the Nishitetsu Group's total CO2 emissions. We have conducted a scenario analysis based on the TCFD recommendations for the railroad business as well, and are pleased to disclose this information. We will continue our efforts to appropriately address climate change and protect the global environment.
The Group has identified eight material issues, including climate change issues. In response, we have established a system to promote sustainable management by establishing the ESG Promotion Committee, the Executive Committee, and various committees to discuss important policies and directions in sustainable management and to assist the President & CEO in decision-making.
The ESG Promotion Committee is chaired by the President and CEO and attended by all executive officers. Committee meetings are held monthly to receive reports on activities related to sustainable management from each committee, each division, and the executive officers in charge of each group company and to confirm the status of implementation.
In addition, the Committee also directs the company to set voluntary targets for solving climate change issues, check the progress of the “Environmental Impact Reduction Plan,” which summarizes activities to reduce environmental impact, and consider measures to address these issues.
The Board of Directors receives reports from time to time on important matters discussed at ESG Promotion Committee meetings and provides appropriate oversight.
[Sustainable Management Promotional System]
1. Risks and opportunities
The risks posed by climate change can be divided into risks associated with the transition to a decarbonized society (transition risks) and those linked to physical impacts (physical risks).
In addition, since climate change is also an “opportunity” for our group to grow, we evaluated the importance of climate change from both a “risk” and an “opportunity” perspective.
In addition to the bus business, this time in the railroad business, the results identified an opportunity to shift to rail with lower CO2 emissions, in addition to the risks associated with electricity costs and next-generation technology implementation costs.
- Climate-related risks and opportunities in bus business
|
Type |
Evaluation |
Risks |
Opportunities |
||
|
Transition risk |
Policies |
Carbon tax |
High |
- Cost increase due to introduction of carbon tax |
- Reduced fuel procurement costs by introducing EV buses, etc. |
|
Regulation |
High |
- Cost incurred in response to requests for conversion to EV buses, etc. |
- Preemptive investment and introduction of EV buses, etc. made through implementation and strengthening of policies and subsidy programs that promote the spread of EV buses, etc. |
||
|
- If not, difficulty in continuing business |
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|
Technology |
Diffusion of low-carbon technologies |
High |
- Increase in procurement costs for EV buses, etc. |
- Lower procurement costs and barriers to introduction of EV buses, etc. arising from lower prices and the ability to travel long distances |
|
|
- Increase in operating costs such as management and replacement costs of storage batteries |
- Decrease in fuel procurement costs owing to improved fuel efficiency resulting from lighter vehicles |
||||
|
- Increased maintenance costs for EV buses, etc. |
- Increase in sales due to introduction of mixed freight/passenger transportation |
||||
|
- Increase in hardware construction costs, such as refueling facilities, etc. |
- New revenue sources through the use of storage batteries for energy management, etc. |
||||
|
Advances in next-generation technologies |
High |
- Cost incurred to implement automated driving technology |
- Cost reductions through fuel and manpower curtailment due to the spread of automated driving technology |
||
|
- Increased maintenance costs for the automated vehicle fleet |
- Increase in sales due to active use of transportation services by MaaS and AI-based on-demand services, etc. |
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|
Reputation |
Customer reputation/behavioral change |
High |
- Failure to be proactive about environmental measures will impact sales as customers become more environmentally conscious. |
- Increase in sales due to shift to buses with lower CO2 emissions per unit of transportation volume as customers become more environmentally conscious. |
|
|
- Decrease in sales due to a decline in the environmental superiority of buses resulting from the spread of EVs, etc. |
- Increased sales arising from shift to buses in response to the increased fuel burden on private cars |
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|
- Decrease in sales due to the spread of teleworking |
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|
Reputational change among investors |
Medium |
- If we are not proactive in environmental measures, the stock price will decline and the cost of capital will rise. |
- If we are able to shift to low-carbon and environmentally conscious business, capital costs will fall as ESG investment expands. |
||
|
Physical risk |
Long-term |
Average temperature increase |
Medium |
- Increased cooling costs and capital investment costs |
- Cost reductions due to fewer operational disruptions caused by heavy snowfall |
|
- Increased heat stroke response costs |
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|
- Response costs incurred due to reduced operating capacity resulting from impacts on road surfaces and vehicles |
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|
- Decrease in sales due to a slowdown of outings |
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|
Immediate |
Intensification of extreme weather |
High |
- Decrease in sales due to traffic stoppages on roads and in tunnels, etc. |
- Reputation enhancement through providing storage batteries as an emergency power source in the event of a power outage |
|
|
- Cost incurred for restoring damage to vehicles and trucks, safety and health measures for on-site workers, etc. |
- Gaining customer trust by establishing a disaster-resistant operational structure, including multiple possible routes |
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|
- Decrease in sales due to a slowdown of outings |
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- Climate-related risks and opportunities in the railroad business
|
Type |
Evaluation |
Risks |
Opportunities |
||
|
Transition risk |
Policies |
Carbon tax |
High |
- Increase in energy procurement costs due to introduction of carbon tax |
- Possible shift to rail as people shift away from cars due to high fuel prices |
|
- Reduction in energy consumption through the introduction of environmentally friendly vehicles and equipment |
|||||
|
Regulation |
High |
- Increase in costs for introduction of environmentally friendly vehicles and equipment, etc. |
- Possibility of shifting from private cars to rail through the introduction of a road pricing system |
||
|
- Unstable power supply due to increased demand |
- Reduction in energy consumption through early energy-saving measures |
||||
|
Industry/Market |
Increase/decrease in prices of important commodities/products |
Medium |
- Increase in material costs associated with the spread of renewable energy |
- Extended life of vehicles and facilities due to the development of new materials |
|
|
Changes in energy mix |
High |
- Increase in energy procurement costs due to the spread of renewable energy |
- Reduction in energy consumption through the introduction of environmentally friendly vehicles and equipment |
||
|
- Unstable power supply due to increased demand |
|||||
|
Technology |
Diffusion of low-carbon technologies |
High |
- Increase costs for introduction of environmentally friendly vehicles and equipment |
- Reduction in energy consumption through the introduction of environmentally friendly vehicles and equipment |
|
|
- Earning income from mixed freight and private power generation using idle land, etc. |
|||||
|
Advances in next-generation technologies |
High |
- Decline in the environmental superiority of railroads due to progress in electric vehicles and automated driving technology |
- Decrease in operating, energy, and maintenance costs through proactive introduction of next-generation technologies |
||
|
- Increased costs to support next-generation technologies |
- Promote active use of public transportation by popularizing MaaS (mobility as a service), etc. |
||||
|
Reputation |
Customer reputation/behavioral change |
High |
- Failure to be proactive about environmental measures will impact sales as customers become more environmentally conscious. |
- Rising environmental awareness among customers is driving a shift to railroads with lower CO2 emissions per unit of transportation volume. |
|
|
Reputational change among investors |
Medium |
- If we are not proactive in environmental measures, the stock price will decline and the cost of capital will rise. |
- Decrease in cost of capital due to expansion of ESG investments |
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|
Physical risk |
Long-term |
Changes in precipitation and weather patterns |
High |
- Increase in costs to cope with rainfall, strong winds, etc. |
- Increased reputation through the maintenance of vehicles and equipment that are resistant to wind and flood damage. |
|
- Decrease in sales due to a slowdown of outings |
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|
Average temperature increase |
High |
- Increase in energy costs and capital investment costs required for cooling |
- Lower winter heating costs |
||
|
- Difficulty in recruiting new employees due to the avoidance of workplaces with outdoor work |
- Cost reductions due to reduced transportation disruptions from heavy snowfall |
||||
|
- Decrease in sales due to a slowdown of outings |
|||||
|
Immediate |
Intensification of extreme weather |
High |
- Increase in response costs to typhoons, torrential rains, etc. |
- Increased trust through quick response to anomalies |
|
|
- Difficulty in continuing business due to increased damage to facilities |
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|
- Decrease in sales due to a slowdown of outings |
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2. Scenario analysis
Among the scenarios that indicate the range of increase in global average temperatures compared to the pre-industrial era, as drawn up by the Intergovernmental Panel on Climate Change (IPCC), the International Energy Agency (IEA), and other expert organizations, the 1.5°C external scenario, in which the temperature will be kept below 1.5°C by a system transition based on the Paris Agreement, and the 4°C external scenario, in which the temperature will rise to around 4.0°C by the end of the 21st century without new policies or systems being introduced, were analyzed with respect to the impact of climate change on bus and railway businesses.
[List of parameters used]
|
Important items |
Assumption Parameter |
Parameter Target area |
Unit |
BAU |
Year 2030 |
Sources |
|
|
4°C |
1.5°C |
||||||
|
National carbon emission targets/policies |
Carbon tax |
Developed nations |
Yen/tCO2 |
- |
- |
14,300 |
- IEA WEO2020 |
|
- IEA NZE2050 |
|||||||
|
- 4°C scenario Equivalent to current level |
|||||||
|
Environmentally friendly vehicles |
World |
% |
- |
2% |
23% |
- IEA WEO2020 |
|
|
- IEA NZE2050 |
|||||||
|
Changes in energy mix |
Percentage change in fuel prices |
World |
% |
- |
21% |
-5% |
- IEA WEO2020 |
|
- IEA NZE2050 |
|||||||
|
Electricity price |
Japan |
Yen/MWh |
23,760 |
22,880 |
25,410 |
- IEA WEO2018 |
|
|
Advances in next-generation technologies |
Change in number of passengers between private cars and buses |
World |
% |
- |
- |
- |
- IEA NZE2050 |
|
- 4°C scenario Equivalent to current level |
|||||||
|
Intensification of extreme weather |
Incremental flood frequency multiplier |
Japan |
times |
- |
4 times |
Double |
Assumptions made from the "Proposal for Flood Control Planning in Light of Climate Change" by the Technical Study Group on Flood Control Planning in Light of Climate Change. |
|
Change multiplier for rainfall duration of 12 hours or more |
Japan |
times |
1.4 times |
1.15 times |
|||
- Bus business
In the 1.5°C scenario, the introduction of a carbon tax is expected to significantly increase costs, but this will be largely recovered by promoting the introduction of EV buses, etc., and the cost will decrease due to a change in the energy mix and a modal shift due to the spread of mobility as a system (MaaS). On the other hand, under the 4°C scenario, we found that the company may not be able to cope with a significant increase in costs due to higher diesel oil prices, which could jeopardize the survival of the business.
To address this carbon tax risk, we will promote the introduction of EV buses and other vehicles and collaborate with other companies to promote MaaS.
- Financial impact assessment of the bus business (Change in projected cost per year 2030)
|
Risk item |
Anticipated events |
Impact (Note 1) |
||
|
1.5°C |
4°C |
|||
|
Transition risk |
Carbon price |
(1.5°C) Carbon tax is introduced (but emission factor decreases) |
– – – |
|
|
(4°C) Carbon tax will not be introduced |
||||
|
National carbon emission targets/policies |
(1.5°C) Significant progress in the introduction of environmentally friendly vehicles |
++ |
||
|
(4°C) Fewer environmentally friendly vehicles introduced |
||||
|
Changes in energy mix |
(1.5°C) Crude oil prices fall and diesel oil prices also fall |
++ |
– – – |
|
|
(4°C) Crude oil prices soar, and diesel oil prices also rise |
||||
|
Diffusion of low-carbon technologies Advances in next-generation technologies |
(1.5°C) Participation in VPP/V2X, etc. will increase, and modal shift will lead to an influx of customers from private cars to buses |
++ |
||
|
(4°C) Participation in VPP and V2X is limited, and the number of customers is expected to grow |
||||
|
Physical risk |
Intensification of extreme weather |
(1.5°C) Slight increase in damage to operating facilities and vehicles due to torrential rains, etc., and slight decrease in operating revenue |
– |
– |
|
(4°C) Increased damage to operating facilities and vehicles due to torrential rains, etc., and decreased operating revenues |
||||
(Note 1: "+" indicates a positive impact on business and financials, "-" indicates a negative impact, and the number of signs indicates the magnitude of the impact.
- Railroad business
In the 1.5°C scenario, we found that costs would increase due to the introduction of a carbon tax and the impact of increased penetration of renewable energy arising from changes in the energy mix.
In addition, under the 4°C scenario, the effects of extreme weather events, such as more severe weather events, are more than twice as great as under the 1.5°C scenario.
To realize a decarbonized society, we will work on systematic replacement of existing vehicles with energy-efficient ones and introduction of solar power generation. The Group will also continue to improve facilities and vehicles that are resistant to wind and flood damage and continuously review our BCP, with the aim of realizing a 1.5°C world.
- Financial impact assessment of railroad business (Change in projected cost per year 2030)
|
Risk item |
Anticipated events |
Impact (Note 1) |
||
|
1.5°C |
4°C |
|||
|
Transition risk |
Carbon price |
(1.5°C) Carbon tax is introduced (but emission factor decreases) |
– – |
|
|
(4°C) Carbon tax will not be introduced |
||||
|
Changes in energy mix |
(1.5°C) Significant penetration of renewable energy and higher electricity prices |
– |
＋ |
|
|
(4°C) Renewable energy diffusion is not progressing and electricity prices are falling |
||||
|
Physical risk |
Intensification of extreme weather. Changes in rainfall and weather patterns. |
(1.5°C) Slight increase in damage to railroad facilities and rolling stock due to torrential rains, etc., and slight decrease in freight revenue |
– |
– – |
|
(4°C) Increased damage to railroad facilities and rolling stock due to torrential rains, etc., and decreased freight revenues |
||||
(Note 1: "+" indicates a positive impact on business and financials, "-" indicates a negative impact, and the number of signs indicates the magnitude of the impact.
Based on the results of the scenario analysis in our bus and railroad businesses, we will continue our efforts to realize a 1.5°C world so that we can help to bring about a sustainable society where no one is left behind, in order to be a company that is trusted by society and continues to grow over the long term.
At the ESG Promotion Committee chaired by the President and Chief Executive Officer, the Nishitetsu Group formulates a Group-wide plan based on the “Environmental Impact Reduction Plan,” which includes reductions in CO2 emissions*1 created by each division and Group company. The PDCA cycle of risk management is implemented by monitoring progress and instructing each division and Group company to make revisions and the like.
*1 The CO2 emissions that our Group is monitoring are for Scopes 1 and 2 based on the GHG Protocol, and we are currently discussing a method for monitoring Scope 3.
Scope 1: Direct emissions from fuel use by businesses themselves
Scope 2: Indirect emissions from the use of electricity, heat, and steam supplied by other companies
Scope 3: Emissions associated with activities of businesses other than Scopes 1 and 2
In November 2022, the Nishitetsu Group formulated its long-term vision “NNR Group CYD Vision 2035: Growing in harmony with you” with the target year of FY2035, and clearly stated the roadmap “Toward Carbon Neutrality (2050).” In addition, reduction targets in the 16th Medium-term Management Plan (FY2023-FY2025) have been set in line with the roadmap.
CO2 reduction targets:
- FY2025: 38% reduction from the FY2013 (16th Medium-term Management Plan)
- FY2035: 50% reduction from the FY2013 level (Long-term Vision)
We are aiming to achieve the national target of a 46% reduction in CO2 emissions in fiscal 2030 compared to fiscal 2013, with the entire Group aiming to become carbon neutral (by 2050).
— Toward Carbon Neutrality (2050)
