At the SATO Group, we recognize that climate change has pronounced impacts on the society and that it is critical for us to act on climate issues when managing our business. In 2021, we declared our support for the Task Force on Climate-related Financial Disclosures (TCFD) established by the Financial Stability Board and started applying TCFD recommendations to our climate actions.
Basic stance
We believe that sustainability is inseparable from our business, making it our corporate mission to “create new value for our customers through products and services of superior quality, and to contribute towards a better and more sustainable world.”
Although our basic policy for sustainability was only set forth in 2018, we have long positioned sustainability as the cornerstone of company management.
To ensure we contribute to a low-carbon society while seeking higher corporate value, we focus on two aspects.
- （1）Help customers improve productivity to shrink their carbon footprint with our value-added solutions.
- （2）Make systematic efforts to reduce carbon dioxide emissions linked to our operations, enhance green procurement practices and expand recycling options.
(See “4. Metrics and targets” for how we track our progress in reducing carbon dioxide emissions.)
In driving our sustainability initiatives, we worked to identify issues that are material for our business and stakeholders in three areas — A. Our value proposition, B. Fundamentals of our value creation, and C. Environmental responsibility — and have taken the following actions to address climate change in each area.
- A. Our value proposition:
- Offer eco-friendly products; help customers reduce carbon footprint with our solutions
- B. Fundamentals of our value creation:
- Improve supply chain management
- C. Environmental responsibility:
- Install solar power systems, shift to renewable energy sources, participate in tree planting activities, and optimize consumables production and logistics processes
We will enhance the quality and quantity of information we disclose by continuing climate scenario analysis, which we started based on TCFD recommendations. We will also strive to improve our sustainability performance for greater social and business value.
Climate-related disclosure, guided by TCFD principles
1. Governance
In the current medium-term management plan we put into effect from FY 2021, we set “Tagging for Sustainability” as the next business model we would aim toward. The plan also defines our three growth strategies, one of which is to integrate ESG into our corporate model, specifically by lowering environmental impact, building on human resources and strengthening governance.
To ensure we infuse sustainability into our business growth efforts, we have included members from corporate planning and key business divisions into the Sustainability Promotion Committee, which reports directly to our Senior Executive Management Meeting and is overseen by our board of directors.
As this committee — led by the head of our Sustainability Promotion Division — discusses and formulates policies/plans for driving actions to address climate change and other sustainability priorities across the SATO Group, it will refer those matters that may significantly impact business strategies and management plans to the Senior Executive Management Meeting, providing reports and deliberation outcomes to facilitate top-level decision-making at the meeting.
The committee is also required to report regularly on its activities and progress to our board of directors through the Senior Executive Management Meeting. We have a non-executive internal director on the board (also chair of the aforementioned meeting) who has been appointed to lead discussions on climate change.
Climate change governance at SATO
2. Strategy
In a company-wide project led by the head of our Sustainability Promotion Division, we conducted our first climate scenario analysis with the help of external advisers to define scenarios of potential future climate states, assess the impact of climate-related risks and opportunities on our business and financial forecast under each scenario, and identify actions to manage these risks and opportunities.
Under the following two, publicly available scenarios based on information from the International Energy Agency and other sources, we developed two views on the medium and long term (2030 and 2050) future of our AIDC (automatic identification and data capture) industry and three key sectors our customers operate in.
- 1.5°C scenario aligned with the Paris Agreement:
A scenario whereby efforts for sustainable development are effective at limiting the increase in the global average temperature to at most 1.5°C above pre-industrial levels - 4.0°C “too little, too late” transition scenario:
A scenario whereby the world falters on serious climate action, resulting in the global average temperature rising by some 4.0°C compared to pre-industrial levels
Through the analysis, we determined that we will be able to operate in our industry with resilience under both scenarios. In the first scenario, this requires that we decarbonize our business model at an increasing speed to adapt to new carbon taxes and soaring raw material prices amid massive advancements in decarbonization policies. In the second scenario, we must make sure to manage physical risks that cause business interruption and damage across our operations and supply chains to avoid costly consequences.
Examples of our future scenarios
The 1.5°C scenario presents substantial risks associated with rising production costs as businesses compete for critical energy minerals, recyclable materials and fast-depleting forest resources. But it also creates demand for eco-friendly products/solutions and reliable traceability systems that underpin the circular economy, bringing huge opportunities for our tagging technology and business.
The 4.0°C scenario, on the other hand, carries physical and business continuity risks arising from extreme weather events and climate hazards, which increase costs significantly for our operations.
As our mission is to contribute towards a better and more sustainable world, we will pursue measures to meet the first scenario but also plan for the second from risk management perspectives.
Possible actions for managing risks, as identified from our climate scenario analysis, include further cutting our carbon dioxide emissions, building a socially responsible procurement framework and strengthening business continuity planning within our supply chains.
Actions for managing related opportunities, on the other hand, center on delivering value to customers and the society through, for example, developing and offering more eco-friendly products/solutions and expanding business for data collection or utilization.
Our assessment of climate-related risks and opportunities, with potential actions identified
3. Risk management
With the project team having completed the first climate scenario analysis, the Sustainability Promotion Committee will officially take the lead, starting FY 2022, to carry on with the analysis at higher accuracy and better embed analysis outputs in the company’s strategic planning.
With the support of its subcommittee, the committee will regularly evaluate how climate-related risks can impact the company’s business and financial position, based on input parameters and assumptions (such as those related to policy changes) used in the scenario analysis.
The committee will report these risk evaluations to not only the Senior Executive Management Meeting but also the board of directors to ensure that processes for managing climate-related risks are integrated into the company’s overall risk management. It will also collaborate with the Risk Management Committee to manage physical risks and draw up crisis countermeasures should such risks occur.
4. Metrics and targets
Reducing carbon dioxide emissions is essential to tackling global warming and making our society sustainable. We understand that we are responsible for the environment, and work to monitor and cut the carbon footprint of our business activities.
To lower our environmental impact, we aim to halve groupwide carbon dioxide emissions from FY 2016 levels by FY 2030. This medium/long-term goal we set is higher than the greenhouse gas emission reduction target announced by the Japanese government in April 2021.
Also see: Greenhouse gas emissions
We will make efforts to set new targets and disclose, for example, our Scope 3 carbon dioxide emission, based on important metrics we identify from the climate scenario analysis. We also plan to disclose how we monitor some of our materiality KPIs.
In addition, we aim to formulate and announce a company strategy toward achieving carbon neutrality (by offsetting the greenhouse gas emissions we produce) by 2050.
