Climate Change

Climate-related agenda items at Board of Directors and other meetings (FY2023)

Primary factors impacting Daifuku’s business operations

Assessment of climate-related risks and opportunities

We have assessed the level of impact, both qualitative and quantitative, on the Group’s business for each identified transition risk, physical risk, and opportunity. These results have been categorized based on factors such as time period until risk manifestation or opportunity realization, likelihood of risk manifestation or opportunity realization, and financial impact, as shown below. In response to our assessment, we are implementing appropriate countermeasures for each risk and opportunity.
The definitions for time period, likelihood, and impact are as shown in the chart below.

Significant risks and opportunities for the Group

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Response to climate-related risks and opportunities

In response to the identified significant risks and opportunities, the Daifuku Group has established the Daifuku Environmental Vision 2050 and is pursuing the following initiatives based on our policy of realizing a world where material handling systems operate with zero environmental impact.

① Group-wide Scope 1 and Scope 2 reductions

In fiscal 2023, the Group’s environmental targets for 2030 were revised to a higher standard, and the Group received validation from the Science Based Targets initiative (SBTi) for our CO₂ emissions reduction targets. Scope 1 and Scope 2 are projected to reduce the Group’s overall CO₂ emissions by 60% by 2030, with fiscal 2018 as the base year.
In our business operations, alongside fostering awareness of greenhouse gas (GHG) reduction within the Group through the implementation of an Internal Carbon Pricing (ICP) system, we are actively advocating for energy visualization at our production sites and engaging in energy conservation initiatives to establish an energy monitoring and management system on a global scale. Specifically, we are systematically transitioning to LED lighting, enhancing the efficiency of air conditioners and compressors, and reassessing production facilities and methods. Additionally, we have set a target for the integration of renewable energy sources for 2030, and we are promoting the installation of new photovoltaic systems, the introduction of green power, and the purchasing of non-fossil fuel certificates at production sites both within and outside of Japan.

② Reduction of environmental impact in the supply chain

In accordance with our management philosophy and Group Code of Conduct, we have established a procurement policy for the Group. It includes the following statement on reducing environmental impact: “We will comply with laws, regulations, and agreements related to environmental conservation, and we will give priority to the procurement of products and services with a lower environmental impact. We will provide guidance and support to our business partners as needed, and we will address environmental issues such as climate change and biodiversity conservation throughout our supply chain.” In addition, the Daifuku Group established the Sustainable Procurement Guidelines in fiscal 2023 as a new standard for sustainable procurement activities. These guidelines are a complete revision of the CSR Procurement Standards established in fiscal 2017 with the aim of promoting further initiatives throughout the supply chain to resolve a wide range of social issues. In order to identify and mitigate risks in our supply chain, we plan to disseminate these guidelines to our business partners, verify their compliance, and conduct audits.
In addition, we launched the Supply Chain CO₂ Reduction Program in fiscal 2023 as our own initiative to reduce CO₂ emissions at our suppliers. This initiative calls for suppliers, which account for approximately 80% of Scope 3 Category 1 emissions in Japan, to set CO₂ emission reduction targets and take initiatives to reduce emissions. We will continue to promote engagement activities, including information sharing and reduction support, to achieve our 2030 target.

③ Enhancement of climate-related information disclosure

We publish climate-related information mainly through our website and integrated report (Daifuku Report), and we engage in direct dialogue with investors and actively provide disclosures for rating agencies such as MSCI, FTSE, Sustainalytics, and CDP. In addition, we hold an IR Day once a year as a forum for dialogue with institutional investors regarding our growth strategy and other topics, and we provide opportunities for briefings that include sustainability-related information. Furthermore, the Group’s CO₂ emissions results (in Scope 1, Scope 2, and some Scope 3 categories) are disclosed following third-party verification.

④ Risk assessments and implementation of risk mitigation measures

We conduct risk assessments on a regular basis. We have identified natural disasters, including typhoons and floods, as severe risks that could have a significant impact on our business performance, and in order to improve the effectiveness of our business continuity plan (BCP), including throughout our supply chain, we are working to minimize the scale of damage in the event of a natural disaster. Furthermore, based on hazard maps prepared by local governments, we have confirmed the risk level of heavy rainfall and flooding at our major sites and are implementing wastewater treatment measures at our production sites. In Asia, where storms and floods are predicted to occur frequently, we are strengthening our production systems, providing drainage pumps and sandbags, and purchasing insurance to cover damage caused by natural disasters, including floods.

⑤ Maintenance and improvement of working environment

Under the direction of the Central Safety and Health Committee, each department and worksite has taken risks into consideration and installed high-efficiency air conditioners and spot coolers and provided workers with air-conditioned clothing. Additionally, in anticipation of reduced productivity due to deterioration of the working environment from rising temperatures, we are taking a variety of measures to prevent heat stroke at major production sites and customer facilities during installation and service work. To prevent temperature rises both inside and outside the buildings, we apply heat-shielding paint to roofs and walls, insulate roofs and walls with double-folded plates, and use urethane resin for flooring materials.

⑥ Reduction of water use

In accordance with our 2030 target in the Daifuku Environmental Vision 2050 to reduce water consumption per sale unit by 30% compared to the fiscal 2018 level, we are striving to reduce water consumption at our production sites and offices. In fiscal 2022, we installed meters on the hydraulic equipment in the plant building with the highest water consumption at Shiga Works to visualize the amount of water used. Hydraulic equipment uses water for cooling, but it was found that a large amount of water was consumed even when the equipment was not in operation, so a temperature sensor was installed in the piping of the hydraulic tank, and a cooling system was introduced to cool the oil only when it is at a certain temperature. This initiative is expected to reduce the annual water consumption of the facility by approximately 75%. We will continue to monitor the current situation at our other production facilities as well, and we will promote initiatives toward achieving our target.

⑦ Strategic response to semiconductor demand

As demand for semiconductors increases, our customers, semiconductor manufacturers, are proactively making capital investments. Many of our material handling systems installed at semiconductor manufacturers operate 24 hours a day, 365 days a year, and their electricity consumption results in large CO₂ emissions, so systems with high energy-saving capabilities are in high demand. We have set quantitative targets for the CO₂ emissions associated with the operation of our products (Scope 3 Category 11) for 2030, and we are strengthening our development capabilities to ensure both product performance and energy-saving performance as well as collaborating with manufacturers to develop products. In China, where demand for semiconductors is expected to increase, we are enhancing our production system by building a new plant to produce products for semiconductors and LCD screens.

⑧ Adaptation to the shift to EVs

We are committed to taking the environment into consideration from the product development stage as well as improving upon our existing environmentally friendly products. Our customers are facing changes in the business environment with the shift to EVs. The weight of materials to be transported on automobile production lines is increasing due to this shift, and the material handling systems that have already been delivered must be modified to accommodate this increase in transport weight. We are responding to our customers’ needs by developing material handling systems that are lighter, save space, and facilitate system modifications.

⑨ Utilization of IoT, ICT, AI, and other advanced technologies in our business

Market requirements for IoT-related products are expected to change considerably as the introduction of AI and digital technologies in industrial equipment and devices accelerates. In addition, demand for industrial IoT-related products is expected to increase as the transition to a low-carbon society progresses through the use of IoT along with increased capital investment in the global manufacturing industry. In order to respond to these factors, we are working to strengthen the development of basic technologies and applied technologies such as AI as well as to build a production framework to meet growing demand. In addition, we are promoting the overall introduction and utilization of these advanced technologies across all of our business activities.

⑩ Response to cold chain and e-commerce demand

Climate change is expected to increase demand for our products and services due to the growing demand for cold chain and e-commerce. At present, we are expanding our business in Asia and North America, and we are promoting the establishment and enhancement of production systems to meet future increases in demand.

⑪ Balance between environmental and social value in material handling systems

Amid growing customer needs for more efficient operations and energy conservation at logistics and production sites, we are striving to balance the environmental and social value of our products. We conduct Life Cycle Assessments (LCAs) during product development in order to reduce CO₂ emissions over the entire life cycle of our products in comparison to conventional products. In addition to this type of environmental value, we also conduct sustainability performance assessments that take into account social value resulting from the introduction of our products, such as increased operational efficiency and improved sorting and storage capacity, in order to visualize and enhance the value we provide.

2. Significant risk scenario analyses

We conducted scenario analyses for identified climate-related risks and opportunities, focusing on those likely to manifest in the future and have a substantial impact on our business. These scenarios were modeled based on projections from the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC).

Transition risks

We analyzed transition risks and opportunities by establishing the following scenarios to evaluate the effects of implementing a carbon tax (carbon pricing) on operating costs and associated energy expenses. The carbon tax was calculated using the projected future GHG (greenhouse gas) emissions (Scope 1 and Scope 2) both in the event that we progress with emission reductions (decarbonization scenario) and in the event that we do not (business-as-usual scenario) based on the Group’s 2030 sales forecast and emission reduction targets. For each scenario, the impact on our business was assessed by multiplying the estimated future GHG emissions by the carbon price projected by the IEA. As for energy costs, we examined energy consumption both in the event that the Group pursues initiatives in line with our reduction targets (decarbonization scenario) and in the event that the scale of our business expands without pursuing reductions (business-as-usual scenario). We evaluated future energy costs by referencing the estimated energy consumption for each scenario and the energy price trends provided by the IEA and other organizations.

Climate change scenarios projected by the Group (transition risk)

Carbon tax
In the business-as-usual scenario (4℃ scenario), the cost increase is expected to be approximately 600 million yen by 2030. By contrast, under the decarbonization scenario (1.5℃ and 1.7℃ scenarios), in which decarbonization initiatives are actively promoted, the cost is expected to increase by about 300 million yen by 2030.

Energy cost
In the business-as-usual scenario (4℃ scenario), costs are expected to increase by about 37% by 2030 compared to the fiscal 2022 level. However, under the decarbonization scenario (1.5℃ and 1.7℃ scenarios), in which decarbonization efforts are actively promoted, costs are expected to increase by about 12-16% by 2030 compared to the fiscal 2022 level.

In terms of both the carbon tax burden and energy costs, the burden in the business-as-usual scenario (4℃ scenario) is greater than that of the decarbonization scenarios (1.5℃ and 1.7℃ scenarios), reaffirming that there are reasons and merits for the Daifuku Group to actively pursue decarbonization and energy conservation initiatives. While a major investment is required to move forward with these initiatives, we anticipate an additional burden of several hundred million yen if we do not pursue them. In order to mitigate the risks affecting our business, we will strengthen our decarbonization initiatives in order to achieve our 2030 reduction targets.

Physical risks

Physical risks have become significant due to the increase in weather-related disasters caused by global warming. We therefore conducted qualitative assessments of the impact of weather-related disasters on 24 of the Group’s major sites (1 in Japan and 23 in other countries). In these assessments, we investigated the hazards of floods, storm surges, droughts, and heat waves at each site under the 2℃ scenario (SSP1-2.6) and 4℃ scenario (SSP5-8.5) and assigned a five-point grade from A (high risk) to E (low risk) according to the degree of hazard. The following table shows the number of sites that were given a grade of A or B (high risk) in this assessment.
The results of the assessment show that the number of high-risk sites for floods, storm surges, and droughts do not increase substantially under either the 2℃ or 4℃ scenarios, indicating that the impact of climate change will be limited. For heat waves, the number of high-risk sites was found to increase in 2050 and 2090 under the 4℃ scenario. The impacts of heat waves include increased air conditioning costs and equipment maintenance as well as decreased productivity due to heat stress. Daifuku will actively take steps to mitigate these risks, such as promoting measures to prevent heat stroke among employees at installation sites and plants.

Climate change scenarios projected by the Group (physical risk)

Number of high-risk sites due to climate change

Roadmap toward carbon neutrality

CO₂ emissions by region

CO₂ emissions (Scope 1 and Scope 2)

CO₂ emissions (Scope 3)

• *We have adopted a more accurate aggregation method and revised the results for Scope 3. (December 2023)

Breakdown of Scope 3 emissions

• *The scope and method of calculation for Scope 3 is as follows.

Status and schedule of renewable energy procurement