Eisai recognizes that climate change is a material issue affecting our corporate activities.
In June 2019, Eisai declared support for the recommendations made by the Task Force on Climate-related Financial Disclosures (hereafter "TCFD"). The TCFD is a task force on climate-related financial disclosure, established under the Financial Stability Board (FSB) at the request of G20 finance ministers and central bank governors. The task force has published recommendations to assist companies in understanding and disclosing the financial implications of the risks and opportunities posed by climate change.
Eisai's disclosures are in line with the core elements of climate-related financial disclosures outlined in the TCFD recommendations.
The TCFD's disclosure recommendations
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| Core Elements | Recommended Disclosures | |
|---|---|---|
| Governance | Disclose the organization’s governance around climate-related risks and opportunities. | |
| Strategy | Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material. | |
| Risk Management | Disclose how the organization identifies, assesses, and manages climate-related risks. | |
| Metrics and Targets | Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material. | |
Governance
a) Describe the board’s oversight of climate-related risks and opportunities
The Board of Directors has established "Rules for Preparing Necessary Systems for Ensuring the Suitability in the Performance of Duties by Corporate Officers," under which the Corporate Officer in charge of environment-related risks (Corporate Officer in charge of Environmental & Safety Affairs) establishes and operates internal controls concerning such risks. "Rules of the Board of Directors" stipulate matters related to ESG and SDGs as reportable items, and the Board of Directors receive quarterly progress reports from the corporate officer in charge on the status of company-wide initiatives and issues related to sustainability, including climate change, and monitor them.
To enhance discussions on sustainability issues at the Board of Directors meetings, the hhc Governance Committee, consisting of seven Outside Directors, has established a subcommittee to check on the status of sustainability initiatives, including climate change countermeasures, and to share information and discuss with the relevant Corporate Officers. The status of the subcommittee's discussion is promptly reported to the hhc governance committee.
b) Describe management’s role in assessing and managing climate-related risks and opportunities
The Corporate Officer in charge of Environmental & Safety Affairs works with the Corporate Officer in charge of ESG to identify and address climate-related risks and opportunities. Since climate change has a wide range of impacts on our business activities and addressing climate change requires cross-organizational cooperation, we have a system in which the Corporate Officers in charge of production, finance, etc. also collaborate as appropriate in the process of identifying and responding to these risks and opportunities. In addition, significant business risks, including climate-related risks, are managed by the Risk Management Committee, chaired by the Corporate Officer in charge of Internal Control, which reports to the Board of Directors.
Strategy
a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term
Eisai has identified three physical risks1 , four transition risks2 , and one opportunity as climate-related risks and opportunity. These risks are prevented from materializing under the risk management system. With regard to the opportunity "Responding to Healthcare Needs arising from Climate Change," we aim to contribute to society through the execution of our business plan, based on the recognition that it is the responsibility of pharmaceutical companies to maintain and improve access to medicines, regardless of how climate change progresses.
Identified Risks and Opportunity and Expected Time Horizon for Materialization
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| Category | Risk / Opportunity | Expected Time Horizon of Materialization |
|---|---|---|
| Physical Risk | ①Stagnation of production activities | Short ~ Long |
| ②Damage from natural disasters | Short ~ Long | |
| ③Increased health risks | Long | |
| Transition Risk | ④Increased costs due to carbon tax /Increased energy costs | Medium ~ Long |
| ⑤Additional capital investment | Medium ~ Long | |
| ⑥Responding to the demand for low-carbon products | Short ~ Medium | |
| ⑦Lower trust from stakeholders | Long | |
| Opportunity | ⑧Responding to Healthcare Needs arising from Climate Change | Long |
Short: less than 3 years Medium: 3-10years Long: Over 10 years
b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning
The financial impact on Eisai of the identified risks and opportunity is as follows.
Financial Impact on Eisai of Identified Risks and Opportunity
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| Category | Risk / Opportunity | Financial Impact on Eisai Group |
|---|---|---|
| Physical Risk | ①Stagnation of production activities | Sales may decrease due to stagnation of operations of manufacturing sites and other facilities caused by natural disasters.
Supply chains may be affected by natural disasters, resulting in supply delays or shortages and stagnation of production activities. |
| ②Damage from natural disasters | There is potential for damage to employees, buildings, equipment, and inventory.
Increased risk of natural disasters could increase insurance premiums. |
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| ③Increased health risks | Climate change could lead to increased risks of infectious diseases and a dysfunction of health care system.
As a result, the investment and cost burden required to maintain and improve access to medicines may increase. |
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| Transition Risk | ④Increased costs due to carbon tax /Increased energy costs | Higher carbon tax prices and electricity cost could increase energy costs and prices of procured goods. |
| ⑤Additional capital investment | In meeting GHG emission reduction requirements, existing facilities may become obsolete or require additional capital investment. | |
| ⑥Responding to the demand for low-carbon products | Additional costs may be incurred to switch packaging materials, etc. to products with lower GHG emissions in responding to increased customer demand for low-carbon products. | |
| ⑦Lower trust from stakeholders | Eisai has set a goal to achieve carbon neutrality by 2040, but failure to achieve this goal may lead to a decline in trust from shareholders, investors, and other stakeholders. | |
| Opportunity | ⑧Responding to Healthcare Needs arising from Climate Change | Providing products and services that address the growing healthcare needs associated with climate change could lead to future market opportunities. |
c) Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario
Eisai conducted a climate scenario analysis as recommended by the TCFD recommendations and disclosed the results in FY2020 (available in Integrated Report 2020).
In FY2022, Eisai again conducted a qualitative and quantitative analysis considering multiple climate scenarios to reassess the potential impact of climate-related risks and opportunities on Eisai. Based on the analysis considering the financial impact and the time horizon of risk materialization, we evaluated "Stagnation of production activities", "Increased costs due to carbon tax /Increased energy costs", and "Additional capital investment” to be relatively significant.
As for "Stagnation of production activities", in addition to measures such as introduction of backup production systems and securing products and raw materials, we are taking preventive measures against natural disasters. As for "Increased costs due to carbon tax /Increased energy costs", we are promoting investments in energy conservation and GHG emissions reduction based on the roadmap to achieve carbon neutrality by FY2040. As for "Additional capital investment", in addition to implementation of our investment plans, we have introduced Internal Carbon Pricing starting in FY2022 to encourage investment in decarbonization.
With these measures, we assess at this time that the impact of climate-related risks on our strategy has been mitigated.
Financial Impact of Identified Risks and Opportunity and Countermeasures
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| Category | Risk / Opportunity | Financial impact by climate Scenario* | Countermeasures | |
|---|---|---|---|---|
| 3℃～ | 1.8℃/1.5℃ | |||
| Physical Risk | ①Stagnation of production activities | Large | Large | In addition to establishing a backup production system, Eisai is preventing stagnation in production activities by maintaining inventories of products and raw materials for a period of time as necessary. |
| ②Damage from natural disasters | Small | Small | The degree of risk of flooding, inundation, etc., at manufacturing sites and warehouses is evaluated, and damage prevention measures are taken after confirming the extent of possible disasters that may occur. | |
| ③Increased health risks | Large | Large | Eisai is working to develop medicines for NTDs and tropical infectious diseases, including malaria, and is committed to maintaining and improving efficient and effective access to medicines through public-private partnerships in the supply of medicines to infectious disease endemic areas. | |
| Transition Risk | ④Increased costs due to carbon tax /Increased energy costs | Lower than 1.5℃/1.8℃ Scenario | Large（impact of carbon tax will be medium if GHG emissions reduction progresses） | Eisai expects to achieve RE100 in FY2023, earlier than the original target year of 2030. |
| ⑤Additional capital investment | Lower than 1.5℃/1.8℃ Scenario | Medium ~ Large | Internal Carbon Pricing was introduced in FY2022 to steadily promote environmental investments. | |
| ⑥Responding to the demand for low-carbon products | Lower than 1.5℃/1.8℃ Scenario | Small | Low-carbon packaging (biomass plastic) has already been adopted for a product, and the introduction of low environmental impact packaging materials is under consideration for other products. | |
| ⑦Lower trust from stakeholders | Lower than 1.5℃/1.8℃ Scenario | Large | A roadmap for achieving carbon neutrality has been developed and Eisai disclosed its outline.
In accordance with the roadmap, the company is working to steadily promote environmental initiatives by introducing internal carbon pricing from FY2022 and applying for the 1.5 degrees SBTi target. |
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| Opportunity | ⑧Responding to Healthcare Needs arising from Climate Change | Difficult to quantify | Difficult to quantify | In addition to working on the development of drugs for malaria and other infectious diseases, Eisai is also involved in promotion of remote clinical trials and the creation of healthcare solutions using ICT.
DEC tablets, a drug for LF (lymphatic filariasis), are manufactured at the Vizag plant and provided free of charge through WHO. The effects of brand enhancement, increased market opportunity, higher factory utilization rates, and cost of goods reductions on a consolidated basis are expected to continue in the future. |
Relatively significant risks are underlined.
* 3℃～ = Current Policies Scenario 1.8℃ = Delayed Transition Scenario 1.5℃ = Net Zero 2050 Scenario
The following scenarios set by the Network for Greening the Financial System (NGFS) were used in the scenario analysis.
Overview of scenarios used in the analysis
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| Scenario | Assumed temperature rise | Climate Change Policies |
|---|---|---|
| Current Policies | Over 3℃ by 2100 | Only policies currently in place will be retained. |
| Delayed Transition | 1.8℃ by 2050 | CO2 emissions will not decrease in the 2020s, and strong policies will be introduced in the 2030s to limit warming to 2℃. |
| Net Zero 2050 | Below 1.5℃ | Aim to limit global warming to 1.5°C and reduce global CO2 emissions to net zero around 2050 through strict emission reduction policies and innovation starting in the 2020s. |
The temperature increase in the Current Policies Scenario is in line with the increase in the RCP (Representative Concentration Pathways) 6.0 scenario by the Intergovernmental Panel on Climate Change (IPCC). The temperature increase in the Delayed Transition Scenario and Net Zero 2050 Scenario is in line with the increase in the RCP2.6 scenario.
Risk Management
a) Describe the organization’s processes for identifying and assessing climate-related risks
The Corporate Officer in charge of Environmental & Safety Affairs works with the Corporate Officer in charge of ESG to identify climate-related risks and opportunities through a survey of the external environment and internal interviews and conducts periodic reviews. In assessing risk, the significance of risks is determined by considering the impact of the risk and the likelihood of the risk occurring, based on procedures established by the Risk Management Committee chaired by the Corporate Officer in charge of Internal Control, which manages significant business risks, including climate-related risks.
We work to reduce everyday operational risks (1) by assessing important company-wide risks through interviews with all corporate officers and (2) by implementing CSA (Control Self-Assessment) for all the department managers. Climate-related risks are also covered by this CSA.
b) Describe the organization’s processes for managing climate-related risks
The Corporate Officer in charge of Environmental & Safety Affairs reports climate-related risks which are identified and assessed in collaboration with the Corporate Officer in charge of ESG to the Risk Management Committee.
The Risk Management Committee holds regular meetings, with the corporate officer responsible for internal control as the chair and with advice from the Board of Directors, to centrally manage the risks that are deemed to be particularly important. Further, the Committee promotes identification of risks and prompt efficient risk response. In addition, the Committee strives to detect potential risks to Eisai at an early stage by referring to other companies’ cases, etc., and implements measures to prevent those risks from being actualized.
c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management
The Corporate Officer in charge of Environmental & Safety Affairs reports climate-related risks which are identified and assessed in collaboration with the Corporate Officer in charge of ESG to the Risk Management Committee, which centrally manages the risks that are deemed to be particularly important. With this reporting, management of climate-related risks are integrated into Eisai’s company-wide risk management. The discussion of the Risk Management Committee is reported to the Board of Directors, and the Board of Directors advises the Committee on risk management.
For more information on Eisai's company-wide risk management, please refer to "Compliance and Risk management”.
Metrics and Targets
a) Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process
Eisai uses the following metrics to assess climate-related risks.
- Scope 1+2 CO2 emission
- Scope 3, Category 1 CO2 emission
- The ratio of renewable energy usage for all electric power
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks
Please see "Data" under "Initiatives for the Formation of a Carbon-free Society".
c) Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets
Please see "Targets, Issues and Actions" under "Initiatives for the Formation of a Carbon-free Society".
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1
Risks related to the physical impacts of climate change. They are divided into acute risks such as increased severity of extreme weather events (e.g., cyclones, floods) and chronic risks such as changes in precipitation patterns and extreme variability in weather patterns, rising mean temperatures and rising sea levels.
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2
Risks related to the transition to a low-carbon economy. They are divided into policy and legal risks such as increased pricing of GHG emissions, market risks such as increased cost of raw materials, reputation risks such as stigmatization of sector, and technology risks such as Unsuccessful investment in new technologies.
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