Disclosure in Line with TCFD Recommendations
The Company agreed with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in November 2020. In our Long-term Management Plan with 2030 as the target year, we have identified “climate change” as one of our material issues (key management issue). As a corporate entity, we recognize the seriousness of the impacts of climate change on our business activities. We will continue to work on initiatives to create a decarbonized society and enhance our disclosure in line with the TCFD recommendations.
Governance on Climate Actions
We established a system in which the progress in addressing initiatives on issues related to the Company’s sustainability practices that are defined as material are reported to the Board of Directors, and risks are comprehensively identified and reviewed every year to ensure flexible responses to changes in environments. The Sustainability Committee, chaired by the President, recognizes climate change (one materiality) as a particularly important issue, so it checks and discusses risks and opportunities associated with climate change, in addition to the progress made in tackling the issue across the company.
Climate-related Risks and Opportunities
We recognize climate change as a particularly important issue among our sustainability challenges, which encompass medium- to long-term sustainability elements including ESG.
The Sustainability Committee, chaired by the President, discusses and determines policies, metrics, and targets for addressing climate change.
Measures to achieve these targets are incorporated into annual action plans for each business division, and progress is monitored quarterly to manage associated risks.
Strategy
While developing our Long-term Management Plan released in May 2021, we analyzed multiple future scenarios to broadly consider the range of impacts of climate change over the short, medium and long term, and to identify the risks and opportunities that may be particularly important.
We also performed scenario analysis to get the financial impacts on the Tokyu Construction Group of each risk and opportunity under two scenarios: a 2°C or lower scenario where climate measures and regulations have progressed, and a 4°C scenario where the severity of natural disasters have become more acute.
In October 2023, we reviewed and updated certain risks and opportunities after revising our scenario from the below 2°C scenario to the 1.5°C scenario.”
In light of the climate change impacts on the Group’s businesses, we consider reducing our climate risks and taking advantage of the associated opportunities as our most important management issue.
The Group has defined three deliverable values at the core of its management: decarbonization, zero waste and disaster risk reduction, and has been undertaking measures to reduce our climate risks.
For the information required to carry out the studies, we referred to Net Zero by 2050: A Roadmap for the Global Energy Sector, World Energy Outlook 2021 and 2022, published by the International Energy Agency (IEA).
The following sections summarize the business conditions under each scenario and their impacts on our business.
4°C Scenario
Under the 4°C scenario, global society as a whole had not been able to aggressively address climate change and the severity of physical risks have become more acute, involving more frequent large-scale natural disasters and deteriorating work conditions in the summer. We see the following business conditions.
[Worldview]
While government policies and regulations to address climate risks have been passed to some extent largely in developed countries, they have been weak and ineffective, resulting in inadequate climate actions. Thus, environmental regulations did not have a significant impact on businesses. However, temperatures continue to rise inexorably, which are expected to cause more frequent natural disasters with more extensive damage.
[Business conditions for the Tokyu Construction Group]
Aside from direct damage to construction sites from natural disasters, heat strokes in the summer are expected to increase due to rising temperatures and the cost pressure to cope with lower labor efficiency will get higher.
On the other hand, demand for disaster preparedness and disaster risk reduction is expected to grow due to the greater number of natural disasters. This will further expand the Group’s social responsibility, in terms of infrastructure development and disaster mitigation measures.
1.5°C Scenario
Under the 1.5°C scenario, regulations have been enforced and climate actions taken to reduce the temperature rise, and global society is heading toward decarbonization. Hence, transition risks will mostly become more apparent. We see the following business conditions.
[Worldview]
Measures against climate change have been aggressively carried out across global society and government policies, such as a carbon tax and greenhouse gas emissions regulations, are underway. Businesses are forced to bear the costs of these, as well as the cost pass-through from suppliers. Moreover, companies that hesitate to take environmental measures are expected to be negatively affected by withdrawal from investment and brand image deterioration.
The shift toward renewable energy and advancing innovations in decarbonization technologies will also lead to changes in customer awareness, increasing the demand for products and services that help decarbonization efforts.
[Business conditions for the Tokyu Construction Group]
The market for zero-energy buildings (ZEB) and other low-carbon buildings is expected to grow even bigger, requiring construction management with low environmental impacts. Besides new buildings, the demand for building renovations will also grow as the concern for higher energy efficiency increases, requiring energy-saving measures for company-owned properties.
Furthermore, the demand for renewable energy facilities will increase as renewable energy becomes more widely adopted.
Risk Management
Based on our materiality, we itemized and incorporated company-wide risks and opportunities into measures in our annual action plan for each business division. We manage risks by monitoring and reporting our progress to the Management Meeting every quarter.
Recognizing that climate-related risks and opportunities are especially important issues for the Company’s sustainability in the medium to long term, including environmental, social and governance (ESG) elements, the Sustainability Committee, which is chaired by the President, monitors and promotes company-wide sustainability activities.
Risks and Opportunities in the Company’s Medium- and Long-term Sustainability and Response Measures
| Risks and Opportunities | Type | Cause | Main Impact on the Group | Time Horizon | Financial Impacts | Measure | ||
|---|---|---|---|---|---|---|---|---|
| 1.5°C or Lower | 4°C | |||||||
| Risks | Transition Risk | Regulatory risk | Introduction of a carbon tax | ・Cost of carbon tax on our corporate emissions | Medium term | Medium | - | ・Increase utilization rate of low-carbon fuels (GTL and RD) for heavy machinery and generators at construction sites ・Use low-carbon construction materials, increase their utilization rates ・Shift to renewable electricity to achieve RE100 goals |
| Stricter mandatory emissions reporting | ・If the Group falls under the Tokyo Cap-and-Trade Program, profits will be squeezed by the associated costs and the cost of not meeting targets | Short to medium term | Medium | - | ||||
| Technological risk | Greater demand for low-carbon buildings | ・Lost opportunities to get orders due to inability to comply with regulations or requirements for ZEB and other low-carbon buildings | Short to medium term | Large | Medium | ・Expand resource investments on departments involved in ZEB/ZEH-M and wood-based architecture ・Develop technologies to support our corporate brand of wooden construction and wood-based architecture ・Develop ZEB/ZEH-M design presentation tools to enhance sales capabilities |
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| Shift to construction management with low environmental impacts | ・Lost opportunities to get orders due to inability to undertake construction with low environmental impacts that meet customer requirements | Medium to long term | Medium | - | ・Develop innovative technologies that help decarbonization and zero waste efforts (reduce volume of waste plastics, reduce volume of mixed waste) ・Improve construction efficiency through Building Information Modeling (BIM)/Construction Information Modeling (CIM) use |
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| Market risk | Conversion to ZEB of company-owned properties | ・Decrease in revenue due to inability to pass on various costs of converting properties to ZEB onto rental fees | Short to medium term | Medium | - | ・Promote ZEB and other energy-efficient real estate ・Promote disaster-proof offices by renovating decrepit buildings ・Enhance competitive edge on cost through internal business collaboration and new services |
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| Bigger market for renovation | ・With the anticipated growth of renovation work for energy efficiency in the renovation market, lost opportunities to get orders due to delayed response to demand | Short to medium term | Medium | - | ・Capture demand for energy-efficient renovation works and facility upgrades | |||
| Soaring raw material prices (including fuel) | ・Changes in customer attitudes increase the need to adopt materials with low carbon emissions, including raw materials and fuel such as wood. This puts pressure on budgets if the cost increase cannot be passed on to consumer prices | Medium term | Large | - | ・Use low-carbon construction materials, increase their utilization rates ・Provide calculation tool for cumulative carbon emissions from each building material and improve its accuracy |
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| Chronic risk | Rise in summer temperatures | ・Decline in worker productivity due to greater number of extremely hot days, increase in costs for measures to combat heat | Medium to long term | - | Medium | ・Improve construction efficiency through BIM/CIM use ・Improve onsite work efficiency by pre-cutting finishing materials and encouraging the use of pre-cast concrete (PCa) for building frames |
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| Opportunities | Resource efficiency | Greater demand for low-carbon buildings | ・Greater number of orders for ZEB and other low-carbon building projects | Short to medium term | Large | Medium | ・Expand resource investments on departments involved in ZEB/ZEH and wood-based architecture ・Develop technologies to support our corporate brand of wooden construction and wood-based architecture ・Develop ZEB/ZEH-M design presentation tools to enhance sales capabilities |
|
| Energy source | Shift to construction management with low environmental impacts | ・More opportunities to get orders due to ability to respond to the greater demand for energy-saving technologies and renewable energy use during construction | Medium to long term | Medium | - | ・Develop innovative technologies that help decarbonization and zero waste efforts ・Provide carbon emissions calculation from construction and improve its accuracy to enhance sales capabilities |
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| Products and services | Greater demand for renewable energy | ・Increase in sales due to increasing construction demand for renewable energy facilities, such as solar and wind power plants | Short to medium term | Medium | Small | ・Build up a track record in construction works related to renewable energy | ||
| Bigger market for renovation | ・Increase in number of renovation projects due to greater demand for energy efficiency | Short to medium term | Medium | - | ・Capture demand for energy-efficient renovation works and facility upgrades | |||
| Longer infrastructure service life | ・Increase in sales revenue by capturing market for construction work to extend the service life of structures under infrastructure asset management (IAM) ・More opportunities to get orders by developing construction methods for longer service lives using low-carbon materials |
Medium to long term | Medium | Medium | ・Promote IAM, which leverages databases ・External collaboration on IAM ・Develop carbon-neutral technologies |
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| Market | Entry into new markets | ・Creation of new businesses in nonconstruction fields | Medium term | Medium | Medium | ・Create new energy sources that help decarbonization efforts ・Improve and utilize existing energy sources that help decarbonization efforts ・Participate in electricity market trading and electricity supply business using energy storage facilities |
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*Definition of time horizons: Short term means 0 to 2 years, medium term means 3 to 9 years, and long term means 10 to 30 years
*Definition of financial impacts: Small means less than 100 million yen, medium means 100 million yen or more but less than 1 billion yen, and large means 1 billion yen or more
Metrics and Targets
We will promote the development of new technologies and expansion of new businesses to achieve these targets, assuming targets given in Science-Based Target initiative (SBTi) and RE100.
| Item | Base year | Metrics | FY2023 Target |
FY2023 Actual |
FY2024 Target |
FY2030 Target*1 |
FY2050 Target |
|---|---|---|---|---|---|---|---|
| Greenhouse gases | 2018 | Scopes1 and 2 | 12.5% cut | 17.6% cut | 16.2% cut | 38.2% cut | 100.0% cut |
| Scope3 *2 | 12.5% cut | 40.6% cut | 16.2% cut | 38.2% cut | ー | ||
| Renewable energy | ー | Renewable energy use rate | 70.0% | 80.3% | 80.0% | 100.0% | ー |
| Wastes*3 | ー | Final disposal rate | 5.7% | 6.7% | 5.3% | 3% or less | None |
*1: In our long-term management plan, we set a Scope 1 and 2 reduction target of 30% by 2030 (compared to FY2018) based on the WB2°C standard in 2020 and obtained SBT certification. However, in line with the 1.5°C target under the second edition of the SBT Target Setting Guidance, we have revised our 2030 target to a 38.2% reduction (compared to FY2018). Additionally, we plan to review our targets by 2025 to align with the 1.5°C standard in the third edition of the SBT Target Setting Guidance.
*2: Scope 3 emissions are primarily accounted for by Category 11 (Use of Sold Products), with recorded values fluctuating significantly depending on the number and scale of completed buildings. From FY2023, we have calculated these emissions based on a standardized useful life of 60 years for building use, in line with the sector-specific SBT 1.5°C guidance.
*3: The waste data represent the figures for Tokyu Construction on a standalone basis.
Strategy and Financial plans for Transition Plan
Roadmap
The estimated financial expenditures needed to meet this target are as follows. For Scope 1 (direct GHG emissions from fossil fuels), we will aggressively adopt low-carbon fuels such as biodiesel and synthetic fuels. This is expected to require an expenditure of ¥1.8 to 2.0 billion by 2030. For Scope 2 (indirect GHG emissions from electricity use), we will promote the adoption of renewable electricity through virtual power purchase agreement (PPA) schemes and secure international reneweable energy certificates (I-RECs) for our international projects. The total financial outlay for this initiative is estimated at ¥300 to 500 million.
Assessment and Management
To help achieve our targets, we have defined indicators for our major initiatives. We also monitor our progress at our Sustainability Committee meetings held every year in July. The results of monitoring are shown in the table below.
