In October 2021, the Seiko Group announced its support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
We have positioned "climate change and decarbonization initiatives" as one of our materialities, and we have been working on it.
Seiko will continue to disclose information on governance, strategy, risk management, and indicators and targets based on the TCFD recommendations.
Important matters related to climate change are discussed and resolved by the Sustainability Committee, which was established to facilitate the formulation of the Group's ESG and SDGs policies and activities based on these policies, and are reported to the Board of Directors. The Board of Directors is responsible for the oversight function of the Sustainability Committee and regularly discusses important matters related to climate change.
In addition, the rate of CO2 emissions reduction is included as a “non-financial (ESG) assessment” in the performance evaluation index as a KPI for performance-linked executive compensation.
Board of DirectorsThe Board of Directors will receive reports on resolutions from the Sustainability Committee at least once a year, and will be responsible for overseeing efforts and progress on issues. In addition, the Board of Directors will regularly discuss important issues related to climate change.
President(Climate Change Response Supervisor)Important matters related to climate change are overseen by the President. The President chairs the Sustainability Committee, which is ultimately responsible for formulating the Group's ESG and SDGs policies, including important matters related to climate change, and for making management decisions regarding all activities based on these policies.
Sustainability CommitteeThe Sustainability Committee is chaired by the President, who is in charge of climate change, and consists of full-time officers including the director in charge of ESG/SDGs, representative directors and corporate auditors of each Group company. The committee meets twice a year in principle to discuss and pass resolutions on matters related to the Group's ESG and SDGs materiality, including important matters related to climate change, at extraordinary meetings held as necessary, and reports the resolutions to the Board of Directors. Based on the resolutions made by the Sustainability Committee, the directors in charge take the lead in promoting activities.
Climate-related Board of Directors and Committee Meetings Held
Matters related to the Group’s ESG and SDG materiality, including important matters related to climate change, are in principle discussed and resolved by the Sustainability Committee twice a year, and reported to the Board of Directors at least once a year. Since the establishment of the Sustainability Committee in September 2021, that Committee has been actively discussing issues, adopting resolutions, and reporting to the Board of Directors. The main climate-related matters are as follows:
|Month held||Main climate-related content + output|
|Board of Directors||Nov. 2021||Establishment of sustainability policy (Resolution)|
|Dec. 2021||Establishment of long-term targets for reduction of greenhouse gas emissions (Report)|
|Apr. 2022||Key actions for materiality (Report)|
|Jul. 2022||Information disclosure based on TCFD recommendations (Report)|
|Nov. 2022||FY2021 greenhouse gas emissions results (Report)|
|Feb. 2023||Information disclosure update based on TCFD recommendations (Report)|
|Sustainability Committee||Oct. 2021||Key actions regarding materiality (Discussion)|
|Dec. 2021||Establishment of long-term targets for reduction of greenhouse gas emissions (Discussion and Resolution)|
|Mar. 2022||Key actions regarding materiality (Discussion and Resolution)|
|Jul. 2022||Information disclosure update based on TCFD recommendations (Discussion and Resolution)|
|Sep. 2022||Key actions regarding materiality (Report)|
|Dec. 2022||Decarbonization roadmap (including transition plan) (Discussion)|
|Feb. 2023||Information disclosure update based on TCFD recommendations (including decarbonization transition plan) (Discussion and Resolution)|
Performance-Linked Executive Compensation
Compensation for executive directors and corporate officers will consist of a fixed "base salary," a performance-linked "bonus," and additional "stock-based compensation," while compensation for non-executive directors, such as outside directors, will consist of only a base salary. In order to strengthen incentives and ensure the effectiveness of our medium-term management plan, we have set three financial indicators and two non-financial indicators as KPIs for assessing compensation. They are, respectively, consolidated operating profit, consolidated net sales margin, consolidated ROIC, individual evaluation, and ESG indicators (rate of CO2 emissions reduction, etc.). The following table shows the approximate ratios of each type of compensation. (Assuming that 100% of payment is based on measured performance and qualitative evaluation)
Performance-linked compensation indicators
|Bonus||①Consolidated operating profit|
|②Consolidated net sales margin|
|③Individual performance evaluation|
|Stock-based compensation||①Consolidated operating profit|
|②Consolidated net sales margin|
|④ESG assessment: CO2emissions reduction rate (SCOPE1,2), etc.|
Scenario analysis process
In order to assess the financial and business impact of climate-related risks and opportunities on our Group under different scenarios and to enhance our Group's resilience, we conduct scenario analysis according to the following steps.
|Classification||Scenario Overview||Main Reference Scenario|
|Less than 2℃ Scenario||A scenario in which policies and regulations are implemented to achieve a decarbonized society and the global temperature increase from pre-industrial times is limited to less than 2℃. Transition risk is high, but physical risk is lower than in the 4℃ scenario.||・IEA World Energy Outlook 2022.
Announced Pledges Scenario
|4℃ Scenario||A scenario in which no new policies or regulations are introduced and global energy-derived CO2 emissions increase continuously; compared to the less than 2℃ scenario, the transition risk is lower, but the physical risk is higher.||・IEA World Energy Outlook 2022.
Stated Policy Scenario
Scenario Analysis Steps
STEP 1 Identification of significant climate-related risks/
opportunities and establishment of parameters
- Identify climate-related risks and opportunities
- Assess high significance risks/opportunities
- Set parameters related to highly significant risks/opportunities
STEP 2 Setting climate-related scenarios
- Based on the information in STEP 1, etc., identify scenarios that are closely related to the existing scenarios
- Establish climate-related scenarios (social vision)
STEP 3 Assessment of financial
impact for each scenario
- Analyze the financial impact of each scenario based on the scenarios established in STEP 2 and the key climate-related risks/opportunities and related parameters identified in STEP 1
STEP 4 Assessment of the resilience of the strategy to climate-related risks and opportunities and further measures to address them
- Assess the resilience of our strategy to climate-related risks and opportunities
- Consider further response measures
Business impact associated with climate-related risks and opportunities and the Group's response
In FY2021, the Company conducted scenario analysis for its main business areas, and in FY2022, the scope was expanded to include all businesses.
|Risk category||Risk description||Business impact (2030)*1||Our Group's response|
|Less than 2℃ scenario||4℃ Scenario|
|Risk||Transition risk||Policy & regulation||Increased costs due to introduction and strengthening of carbon tax||1.09 billion yen*2
|740 million yen*2
|Technology||Increased manufacturing and transportation costs due to higher energy prices||Medium||Medium|
|Market||Decreased sales due to inability to respond to requests from suppliers for climate-related measures||Medium||Medium||
|Increased procurement costs due to higher raw material prices||Medium||Medium||
|Physical risk||Urgent||Decreased sales due to supply chain disruptions and distribution delays caused by extreme weather conditions||Small||Medium||
|Decreased sales due to interruption of factory and/or store operations and difficulty in securing personnel due to extreme weather conditions||Medium||Large|
|Chronic||Rising loss premiums due to increase in extreme weather conditions||Medium||Medium|
|Opportunity category||Opportunity description||Business impact (2030) *1||Our Group's response|
|Less than 2℃ scenario||4℃ scenario|
|Opportunity||Energy source||Cost reduction by introducing renewable energy||Medium||Medium||
|Products and services||Increased sales of low-power- consumption compatible products due to expansion of CPS/IoT society||Medium||Medium||
|Increased sales of related parts to automobile sector due to ongoing shift to EVs||Medium||Medium||
|Increased sales of low-carbon products and services that can help customers reduce their environmental impact||Large||Large||
|Increased sales of products that respond to consumers' growing environmental awareness||Small||Small||
|Market||Creation of new products & services related to IoT, manufacturing, and distribution that will accompany the promotion of energy conservation||Medium||Medium||
|Increased sales due to improved brand value through decarbonized management||Medium||Small||
- Large business impact: Extremely significant impact on business, such as an impact on profits of 1 billion yen or more, withdrawal from a business, or an interruption of business for several months or more.
Medium business impact: Significant impact on business, such as a profit impact of between 100 million yen and 1 billion yen, negative impact on business plans, downsizing of a business, or a business interruption of one week to one month.
Small business impact: Minor or negligible impact on business, such as a profit impact of less than 100 million yen, little or no impact on business plans, or little or no interruption of business.
- We calculated the 2030 GHG emissions (Scope 1 and 2) based on growth projections and GHG reduction plans, then multiplied them by the IEA-projected carbon prices for both the 2°C and 4°C scenarios. The calculations are based on an exchange rate of 1 USD = 135 JPY.
The Seiko Group Risk Management Committee ("SG Risk Mgt. Committee"), chaired by the President, plays a central role in the Group's efforts to manage risks that may have a significant impact on Group business. We define Group Critical Risks as those that must be addressed across the Group. Each year, the SG Risk Mgt. Committee evaluates the criticality of various risks based on their probability, likely impact, and other factors.
The SG Risk Mgt. Committee receives reports from risk owners at the parent Company and at each Group company regarding Group Critical Risks, in particular, about the types of responses being undertaken and the effectiveness of those responses. The Committee continually monitors these risk responses and reports to the Board of Directors in a timely fashion regarding the state of Group Critical Risks. In addition, there is a system by which the SG Risk Mgt. Committee confirms and shares information regarding Group-wide risks with another organization, the Group Risk Management Committee, which is composed of the Company's full-time officers and the representative directors of each Group company.
Climate-related risks are included among the Group's Critical Risks. To obtain a more detailed analysis of climate-related risks, the Sustainability Committee identifies and evaluates (through scenario analysis, etc.) climate-related risks that could have a particularly large impact on Group companies. It discusses these risks, makes resolutions, and promotes measures to address said risks. Once finalized, its resolutions are reported to the Board of Directors. The Sustainability Committee also regularly reports on climate-related risks to the SG Risk Mgt. Committee through the appropriate director, and reports on the progress of the response measures it adopted.
Group Risk Management Promotion Structure
Seiko Group Risk Management Committee *1Chaired by the President, the Seiko Group Risk Management Committee focuses on risks that need to be addressed across the Group. The Committee also receives reports from risk owners at the Company and at Group companies, and supports the promotion of risk management at each company.
Group Risk Management Committee *2Consisting of full-time officers and representative directors from Group companies, the Group Risk Management Committee confirms and shares information about Group-wide risks, and for critical risks, it also monitors and shares information about risk responses.
Risk Management Committee of Each Group Company *3Each Group company promotes risk management autonomously, led by its own Risk Management Committee.
Sustainability CommitteeThe Sustainability Committee holds discussions and makes resolutions on matters related to the Group's ESG and SDGs materiality, including climate-related risks, and reports the resolutions to the Board of Directors. For climate-related risks that have been selected as Critical Risks for the Group, the Committee reports to the Seiko Group Risk Management Committee through the director in charge regarding specific responses and the Group’s progress in enacting those responses.
Indicators and Targets
In December 2021, the Seiko Group set a long-term target for reducing greenhouse gas emissions. Going forward, we will strive to further reduce greenhouse gas emissions in accordance with the following targets based on the SBT.
Long-Term Targets for Greenhouse Gas Emissions Reduction
[Greenhouse gas emissions reduction targets] *1
Scope 1, 2:42% reduction from 2020 levels
Scope 3:25% reduction from 2020 levels
Aim to achieve carbon neutrality by 2050.
- Review/improve manufacturing processes
- Introduce/renew high-efficiency equipment
- Expand introduction of renewable energy
- Provide environmentally friendly (e.g., improved energy efficiency) products, services, and solutions
- Develop energy-related technologies
- Collaboration with suppliers and customers
*1 Based on the "1.5℃ level" of SBT (Science Based Targets), a science-based greenhouse gas emission reduction target operated and promoted by SBTi (Science Based Targets initiative).
Decarbonization transition plan (Scope 1 and 2)
In March 2023, we created a roadmap toward decarbonization, aiming to achieve carbon neutrality by 2050 in line with our long-term goal of reducing greenhouse gas emissions. We will continue to replace existing equipment with energy-efficient substitutes, improve productivity, and save energy through research, component development, and introducing innovative manufacturing methods and equipment. Regarding the introduction of renewable energy, we will give first priority to introducing new equipment, followed by switching over to renewable energy power at our domestic sites, and then make the same transition to renewable-based power at our overseas sites. We will also switch from fossil fuels to decarbonized fuels and low-carbon fuels, aiming to achieve carbon neutrality by 2050.
Scope 1, 2 GHG emissions (t-CO2)
In order to achieve our long-term emissions reduction goals, we need to reduce our greenhouse gas emissions by 8.4% from the 2020 levels. In fiscal year 2022 we far surpassed that goal, achieving an 11.6% reduction compared to 2020 (to a total of 96,589 metric tons of CO2). This achievement highlights the results of our ongoing energy-saving efforts and our proactive adoption of renewable energy sources.
In FY2022, we continued to aggressively expand this program. Our three domestic watchmaking facilities signed renewable energy supply contracts, and we expanded on-site solar power generation at our two overseas facilities. Furthermore, we increased use of non-fossil fuel certificates in our facilities and stores. As a result, our overall renewable energy ratio more than doubled — from 7.3% in 2021 to 15.3% a year later.
Scope 3 GHG emissions (t-CO2) results
Scope 3 emissions amounted to 572,367 t-CO2, with approximately 63% attributed to Category 1 (purchased products and services), and approximately 17% from Category 11 (use of sold products) making up the majority of the remainder.
|Category 1||Products and services purchased||362,206||63.3%|
|Category 2||Capital goods||25,690||4.5%|
|Category 3||Fuel and energy-related activities
not included in Scope 1, 2
|Category 4||Transportation and distribution (upstream)||39,073||6.8%|
|Category 5||Waste from business activities||2,888||0.5%|
|Category 6||Business travel||3,680||0.6%|
|Category 7||Employee commuting||5,755||1.0%|
|Category 8||Leased assets (upstream)||122||0.0%|
|Category 9||Transportation and distribution (downstream)||2,682||0.5%|
|Category 10||Processing of sold products||12,226||2.1%|
|Category 11||Use of sold products||95,739||16.7%|
|Category 12||Disposal of sold products||5,630||1.0%|
|Category 13||Leased assets (downstream)||546||0.1%|
*The total amount may not match due to the processing of fractions.