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CSR Charter ⅡHarmonizing with the Environment and Contributing to Realizing a Sustainable Society

Actions for Climate Change: Recognition of and Action on Risks and Opportunities

Principle and Outline

Tackling climate change on a global scale is one of the Sustainable Development Goals (SDGs) adopted by the United Nations. The Paris Agreement, a UN accord on climate change, went into force in November 2016. The accord is recognized as a framework for international efforts from 2020 on for solving issues related to climate change. The Daigas Group recognizes that significant and long-term reductions of greenhouse gas (GHG) emissions, known to be a factor in causing climate change, are desired worldwide as the global community faces societal issues such as responding to a heightened risk of natural disasters striking amid exacerbating climate change, and the creation of a low-carbon society in the future.

The Daigas Group believes reducing CO2 emissions is an extremely important mission for the company, whose primary business field is energy. The Group also believes that climate change may negatively affect its earnings and costs throughout its energy businesses.

G20 leaders established the Financial Stability Board (FSB) after the 2008 financial crisis. With the expansion of investment that is socially and environmentally responsible, the FSB established the Task Force on Climate-related Financial Disclosures (TCFD) in December 2015 to develop recommendations for use by companies in providing information to investors and others about their climate-related financial risks. The Task Force developed and published its recommendations in June 2017. The Daigas Group is a supporter of the TCFD and discloses climate-related information in the four areas of governance, strategy, risk management, and metrics and targets as recommended by the TCFD, indicated below. The TCFD also recommends that companies disclose information on the resilience of both their organization and their strategies based on an analysis of climate-related scenarios. We feel it will be necessary to take steps to prepare such information going forward.

While the importance of efforts to counteract climate change cannot be understated, measures to ensure energy security and improve economic efficiency also have high priority, based on the 3E + S plan*, which outlines the basis for Japan’s energy policy. Finding the proper balance will enable us to contribute to the sustainable development of society.

* 3E + S plan
A basic plan developed by the Japanese government and announced in 2018 to achieve a desirable energy mix using an energy policy that is based on the “S” of Safety first, with a high priority on Energy Security that aims to reduce the cost of energy supply by improving Economic Efficiency while also protecting the Environment.

Governance

Governance and management of discussions, decision making, monitoring, supervision, etc. related to business risks and opportunities caused by climate change are implemented in accordance with the Daigas Group's corporate governance and CSR management frameworks.

Strategy

Major risks and opportunities associated with climate change, their impact on business operations and finance, and methods to manage such risks and opportunities are listed below.

Risk

Risk factors Physical factors
(Japan) High tides caused by sea level rise or local abnormal climate, natural disasters such as torrential rain and typhoons (Overseas) Natural disasters occurring at locations of suppliers of LNG, as fuel for city gas and power generation Temperature rise
Impact of risks
  • Flooding of city gas production/supply facilities
  • Procurement of LNG stopped
  • Decrease in city gas sales (demand for hot water supply, heating)
Financial impact of risks
  • Increase in equipment repair costs
  • Increase in costs for procurement of LNG
  • Decrease in city gas sales profit
Measures employed to manage risks
  • Improving water-tightness of important buildings at production facilities (buildings equipped with important functions such as electrical instrumentation or control systems) and elevating the location of equipment
  • Establishing anti-disaster blocks* in gas supply areas where flooding damage is expected, which can suspend gas supplies by remote control
  • Promoting diversity of suppliers to secure stability in procurement of materials and fuels
  • Expanding fields where impact of temperature rise is little or where increased demand is expected, such as air conditioning and electricity
Costs for measures taken for risk management (Not disclosed) (Not disclosed) (Not disclosed)
* Blocks for gas supply areas
Blocks are set up to divide the gas pipeline network so that gas supplies will be suspended only for areas damaged severely by an earthquake, flood, etc. while gas supplies will be continued for areas with no damage.
Risk factors Regulation factors Technical factors Market factors Reputation factors
Tightening of regulations to reduce GHG emissions (changes in national energy plan/targets, introduction of carbon pricing, etc.) Weakening of competitiveness in environmental aspects of own products and equipment Shift in consumer preferences to energy with less GHG emissions Price rise due to increased demand for LNG with less GHG emissions Decrease in investment in companies expected to increase GHG emissions
Impact of risks
  • Because business is mainly supported by fossil fuels, decrease in sales of city gas and electricity.
  • Recovery of investment in equipment becoming difficult, as a result of the above.
  • Decrease in demand for our products and utilization of our equipment
  • Recovery of investment in equipment becoming difficult, as a result of the above.
  • Because business is mainly supported by fossil fuels, decrease in sales of city gas and electricity.
  • Recovery of investment in equipment becoming difficult, as a result of the above.
  • Rise in costs for procurement of materials and fuels
  • Decrease in sales due to rise of city gas and electricity fees
  • Because business is mainly supported by fossil fuels, CO2 emissions will increase, resulting in:
    - decline in capital-raising capability
    - decline in stock prices.
Financial impact of risks
  • Decrease in profits from sales of city gas and electricity
  • Decrease in profits due to lower utilization of equipment Decrease in profits from sales of city gas and electricity
  • Decrease in profits from sales of city gas and electricity
  • Decrease in profits due to less utilization of equipment
  • Decrease in profits from sales of city gas and electricity
  • Decrease in profits due to less utilization of equipment
  • Decrease in profits due to rise of procurement costs
  • Decrease in profits from sales of city gas and electricity
  • Shortage of capital
  • Increase in capital raising costs
Measures employed to manage risks (Measures common to all factors)
  • Developing and introducing (for Daigas Group and customers) high-efficiency products/equipment, equipment using renewable energy
  • Proposing and promoting energy-saving services
  • Conducting research on innovative technologies such as hydrogen, clean gas, and CCS (Carbon Capture and Storage)
  • Proposing policies related to GHG emissions reduction effects as a result of the above
  • Participating and implementing programs to realize a low-carbon society
  • Promoting public relations on GHG emissions reduction effects as a result of the above
  • Promoting public relations on GHG emissions reduction effects as a result of the above
  • Promoting procurement from diverse suppliers
  • Participating in upstream businesses, such as gas field development and LNG projects, to reduce impact of market fluctuations
  • Accepting flexible procurement contracts
  • Dialogue with investors on our contribution to GHG emissions reduction through the above measures and our business vision, etc.
Costs for measures taken for risk management (Environmental accounting)
  • Costs for measures to prevent global warming (investment: 40 million yen, expenses: 910 million yen)
  • Costs for research and development to prevent global warming (investment: 170 million yen, expenses: 100 million yen)

Opportunities

Opportunity factors Physical factors Regulation factors Technical factors Market factors Reputation factors
Temperature rise Tightening of regulations to reduce GHG emissions (changes in national energy plans, introduction of carbon pricing, etc.) Competitive advantage in environmental aspects of our products and equipment Shift in consumer preferences to energy with less GHG emissions Increase in investment in companies contributing to GHG emissions reduction
Impact of opportunities
  • Increase in sales volume of city gas and electricity (air-conditioning)
  • Because business is mainly supported by natural gas with less CO2 emissions, increase in sales volume of city gas and electricity
  • Expansion of businesses utilizing renewable energy and energy-saving services
  • Increase in demand for our products and utilization of our equipment
  • Because business is mainly supported by natural gas with less CO2 emissions, increase in sales volume of city gas and electricity
  • Expansion of businesses utilizing renewable energy and energy-saving services
  • Contribution to CO2 emissions reduction will be understood, resulting in:
    - expansion of capital-raising capability
    - rise in stock prices
Financial impact of opportunities
  • Increase in profits from sales of city gas and electricity
  • Increase in profits from sales of city gas and electricity
  • Increase in profits from sales of city gas and electricity
  • Increase in profits from sales of city gas and electricity
  • Increase in profits due to decline in capital-raising costs
Measures employed for management of opportunities (Measures common to all factors)
  • Developing and introducing (for Daigas Group and customers) high-efficiency products/equipment, equipment using renewable energy
  • Promoting fuel conversion to natural gas
  • Proposing and promoting energy-saving services
  • Conducting research on innovative technologies such as hydrogen, clean gas, and CCS (Carbon Capture and Storage), etc.
  • Participating in upstream businesses, such as gas field development and LNG projects, to secure a stable LNG supply
  • Proposing policies related to GHG emissions reduction effects as a result of the above
  • Participating and implementing programs to realize a low-carbon society
  • Promoting public relations on GHG emissions reduction effects as a result of the above
  • Promoting public relations on GHG emissions reduction effects as a result of the above
  • Dialogue with investors on our contribution to GHG emissions reduction through the above measures and our business vision, etc.
Costs for measures taken for management (Environmental accounting)
  • Costs for measures to prevent global warming (investment: 40 million yen, expenses: 910 million yen)
  • Costs for research and development to prevent global warming (investment: 170 million yen, expenses: 100 million yen)

The reduction of greenhouse gas emissions is an extremely vital mission for the Daigas Group that focuses not only on reductions in the Group’s own business activities, but also reductions at the sites of customers who use the energy we supply. See below for the specific measures we are taking to reduce greenhouse gases.

Please refer below for further information on the Daigas Group's efforts to reduce greenhouse gas emissions.

One of the management targets we have announced is to further promote environmentally responsible business operations by reducing the Group’s CO2 emissions by a cumulative total of about 70 million tons between FY2018 and FY2031. This indicator has implications for the ability to assess reductions society-wide, so it is being linked by management to efforts in the Group’s business operations in order to set targets.

The Group’s long-term vision that extends beyond FY2031 and our upcoming strategies will be addressed and studied as we move forward. The Japan Gas Association, a group company, provides an illustrative example of how city gas and natural gas contribute to long-term measures to counteract global warming, presenting a model for the effective use of city gas infrastructure for the future. See below for more details.

Risk Management

The climate change risks for the Daigas Group may be affected by national policies and systems, environmental competitiveness of the products/equipment to be introduced or developed, consumer preferences for energy sources and products in terms of environmental aspects, and investor evaluation. Departments in charge of gas and electricity businesses and other businesses analyze these factors and the degree of impact of each of them, and list/identify risks for their business. These risks, along with other business risks, are examined by the Executive Board before a business plan is decided.

The climate change risks in each business plan formulated are reported and followed using the indicators and targets related to greenhouse gas (GHG) emissions provided below, in the Environment Subcommittee, CSR Committee, and CSR Promotion Council (Executive Board), and managed according to the PDCA cycle.

Plan Do Check Action

Indicators and Targets

The Daigas Group has set the indicators and targets below for greenhouse gas (GHG) emissions.

Indicator Targets Detailed information
Materiality Indicators Economic Performance
Financial impacts, risks and opportunities due to climate change
Recognition of risks and opportunities link
Medium-term Management Plan 2020 Cumulative contribution to CO2 emissions reduction between FY2018 and FY2021
(Set as an item in materiality indicators and environmental action targets for FY2018 to FY2021)
7 million tons link
Long-term Management Vision 2030 Cumulative contribution to CO2 emissions reduction between FY2018 and FY2031 70 million tons
Environmental Action Targets
(targets toward FY2021)
Environmental Management Efficiency:
Environmental Impact of city gas business per 1,000 m³ of gas produced (Set as an item in CSR indicators)
14.2 yen / 1000 m³ link
CO2 emissions at LNG terminals per million m³ of gas produced 11.7 t-CO2 / million m³
CO2 emissions in office buildings per unit floor space 56.5 t-CO2 / 1,000 m²
CO2 emissions per unit power generation in power generation business Compared to FY2009 Down 15%
CO2 emissions per unit sales in businesses other than power generation business 8.2 t-CO2 / 10 million yen
Efforts to reduce CO2 emissions at customer sites and throughout the value chain Promoting diffusion of highly energy-efficient, high value-added appliances based on natural gas
GHG emissions Scope 1, 2, 3 emissions Recording actual figures
(No target values)
link

The Daigas Group Joins the TCFD Consortium

The TCFD Consortium was established in Japan on May 27, 2019 to facilitate corporate information disclosures on climate change in line with recommendations issued by the Task Force on Climate-related Financial Disclosures, joined initially by 164 company members and others from the worlds of industry and finance, including the Daigas Group. The consortium has five founders, including Professor Kunio Ito of the Graduate School of Business Administration at Hitotsubashi University and Mr. Hiroaki Nakanishi, chairman of the Keidanren (Japan Business Federation). The initiative is led by the private sector, and participating as observers are the Ministry of Economy, Trade and Industry (METI), the Financial Services Agency (FSA) and the Ministry of the Environment (MOE). The consortium will discuss effective corporate information disclosure on climate change action that will help financial institutions and other entities assess how to invest properly based on that information.

See below for more information on the TCFD Consortium.

CSR of Daigas Group

President's Commitment
Management and CSR of the Daigas Group
Policies on CSR
Special Feature
The Daigas Group addresses social issues with its human resources and technical expertise
Corporate Governance
Stakeholder Engagement
Value Chain of the Daigas Group
Actions on Materiality
CSR Charter Ⅰ
Creating Value for Customers
CSR Charter Ⅱ
Harmonizing with the Environment and Contributing to Realizing a Sustainable Society
CSR Charter Ⅲ
Being a Good Corporate Citizen Contributing to Society
CSR Charter Ⅳ
Complying with Laws and Regulations and Respect for Human Rights
CSR Charter Ⅴ
Management Policy for Human Growth
ESG Data
Reporting

President's Commitment
Management and CSR of the Daigas Group
Corporate Principles and CSR Charter
Daigas Group Code of Conduct
Global Compact and ISO 26000
Long-Term Management Vision 2030
Medium-Term Management Plan 2020
CSR Integrated into
Management Strategy
Policies on CSR
Special Feature The Daigas Group addresses social issues with its
human resources and technical expertise
Reducing greenhouse gas emissions
through efficient use of natural gas and expansion of renewable energy
Constructing resilient infrastructure for disaster-resistant urban development
Promoting the evolution of ICT/IoT
services to solve customer problems
Corporate Governance
Corporate Governance
Risk Management
CSR Management
Stakeholder Engagement
Dialogue and Cooperation with Stakeholders
Response to Stakeholders' Voices
Value Chain of the Daigas Group
Enhancement of CSR in Our Value Chain
Social Impact of Business Activities in Our Energy Value Chain and Efforts to Reduce Such Impact
CSR Efforts Throughout Supply Chain
Electricity and Gas Industry Reform
Actions on Materiality
Materiality
Customer Health and Safety
Energy / Emissions
Local Communities
Customer Privacy
Supplier Assessment
Training and Education
Diversity and Equal Opportunity
Economic Performance
CSR Charter Ⅰ
Creating Value for Customers
Index
CSR Indicator
Safety and Security 1: Procurement Stage
Safety and Security 2: Processing Stage
Safety and Security 3: Distribution Stage
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CSR Charter Ⅱ
Harmonizing with the Environment and Contributing to Realizing a Sustainable Society
Index
CSR Indicator
Environmental Management
Environmental Management:
Indicators, Targets and Results
Actions for Climate Change:
Recognition of and Action on Risks and Opportunities
Actions for Climate Change: Method to Evaluate Effects of CO2 Emissions Reduction
Actions for Climate Change: Working to Reduce CO2 Emissions in Business Activities
Actions for Climate Change: Working to Reduce CO2 Emissions at Customer Sites
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CSR Charter Ⅴ
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