Across all areas of our business and value chains, we are promoting initiatives that reduce the environmental impact of our activities, such as carbon dioxide (CO₂) emissions and ensuring the sustainable use of resources.
The impact of climate change is becoming more apparent around the world. It is important that companies’ make strong sustainability commitments and take actions toward solving environmental issues.
We fully understand and support the “1.5°C scenario”*. Last year we disclosed our medium- to long-term targets for the reduction of CO₂ emissions — which account for the majority of greenhouse gase (GHG) emissions — as well as the reduction of water consumption and waste.
At Shiseido, we have been focused on the issue of global warming for a long time. In 1990, we completely abolished chlorofluorocarbons (CFCs). In 1997, we published our environmental targets for the first time — including the reduction of greenhouse gas (GHG) emissions. And in 2020, we announced our commitment to achieving carbon neutrality* by 2026.
By carefully reviewing and redesigning the manufacturing process at both new and existing factories, we were able to strengthen our efforts to accelerate the reduction of CO₂emissions, including by using renewable energy and improving energy efficiency. As a result, CO₂ emissions were reduced by 12% of total emissions in 2020 (compared to 2019).
Following the transfer and joint venture of our Personal Care business, absolute emissions from the product life cycle will be significantly decreased. In addition, we have introduced group wide efforts to contribute to a carbon-free society by further reducing CO₂ emissions in such areas as procurement, production, and use.
Switching from fossil-derived energy, which emits large amounts of CO₂, to renewable energy is one of our important environmental initiatives.
We have been increasing the use of renewable energy at our offices and factories, the latter of which are known for their high power consumption. As a result, our combined ratio of renewable energy from hydropower and solar power increased by 95% in 2020 (versus 2019). In total, renewable energy accounts for 33% of electricity consumed at our sites.
In addition to our East Windsor factory (USA), our Nasu factory (Japan), which began operations in 2019, has replaced 100% of its electricity with renewable energy.
Renewable energy is also used at our offices across three European countries, while 100% of the electricity used at our facilities in Italy and the UK is derived from renewable sources.
Our solar power efforts continue to grow, with systems installed at factories and buildings worldwide. Since 2007, our East Windsor factory (USA) has been equipped with a fixed-tilt solar power system, while a solar-tracking solar power system was installed in 2010.
In addition, solar power systems are installed at such sites as the Liyuan Cosmetics Co., Ltd. factory (China), the Kakegawa factory (Japan), and the Global Innovation Center (Japan).
In Taiwan, solar panels have been installed at our Hsinchu factory, generating electricity used also by the local community.
Japan experiences a lot of rainfall due to its geographical conditions. However, the steep topography makes it difficult to collect and use the water resource effectively because it quickly flows out to sea. Therefore, dams have been used for flood control and water collection, as well as for generating renewable energy, for many years.
Four of our factories in Japan — Osaka, Kakegawa, Kuki, and Nasu — are actively using renewable energy from CO₂-freehydroelectric power. The Nasu factory uses the CO₂-free Tochigi Furusato Electric program,
which is supplied by hydroelectric power plants in Tochigi Prefecture, to achieve 100% renewable electricity.
To maximize the use of renewable energy in order to mitigate climate change as much as possible, we also utilize power generated by small-scale local power companies for the grid. We also strive to make our production activities more sustainable on a local scale by collaborating with local communities.
We are working to reduce CO₂ emissions by improving energy efficiency at all of our factories. Efforts include introducing high-efficiency equipment and switching to energy sources with a lower environmental impact. So far, we have achieved significant improvements in energy efficiency.
In 2020, we introduced a new energy management system (EMS)* at our Kakegawa factory (Japan). In order to reduce wasteful power consumption, we have increased the number of observation points for electricity usage to more than 400— allowing for a more detailed visualization of usage status. By optimizing energy usage this way, we expect to reduce CO₂ emissions by approximately 7% of the total annual emissions at our Kakegawa factory.
Going forward, we will install EMS at all our factories and aim to increase our investment in equipment as well as introduce more initiatives to improve energy efficiency, all of which will further reduce the environmental impact of the entire Shiseido Group.
We are promoting the reduction of CO₂ emissions by increasing the efficiency of transportation within and between regions. In Japan and Hong Kong, we work with key business partners to optimize delivery frequencies, increase truck utilization, and reduce operating vehicle numbers.
For sea transportation in Japan and the USA, we have improved container utilization, and reduced the number of operating containers and shipments by consolidating cargo and optimizing loading efficiency.
In 2020, progress in transportation optimization has contributed to a 17% reduction in CO₂ emissions from Japan’s factories to distribution centers compared to 2019.
We recognize that climate change is not only an environmental issue, but a real issue that will affect our business strategies and financial plans over the medium to long term. As such, various factors related to climate change, such as regulations, natural disasters, and consumer perceptions should be considered.
We strive to mitigate the climate-related risks which influence both our business and the wider society, and turn them into opportunities. Therefore, in 2020, we disclosed our target of achieving carbon neutrality by 2026 through the reduction of Scope 1*1 and Scope 2*2 CO₂ emissions. We also committed to accelerate our plans to analyze climate-related risks and opportunities, and integrate them into our group-wide actions.
The Shiseido Sustainability Committee discusses management decisions concerning sustainability issues. The committee is chaired by a Representative Director and consists of executive officers in charge of Corporate Strategy, Social Value Creation, R&D, Supply Network, Corporate Communications, Brands, and Corporate Auditors. In 2020, in addition to the Committee, significant issues were discussed at the Executive Committee, the Innovation Committee, and the Board of Directors for a total of 12 meetings. At the Committee, mid- to long-term targets related to CO₂ emissions,, water, waste, packaging, and sustainable procurement of, for example, palm oil and paper, were also discussed — to proactively tackle the environmental issues related to these topics. As those targets impact our corporate direction, they were raised with the Board of Directors as well. Due to the importance of change-related issues, the Board of Directors stressed that what we work to achieve should reflect our stakeholders’ expectations (Consumers, Business Partners, Employees, Shareholders, Society and the Earth), and encouraged us to commit to ambitious targets.
We conducted our scenario analysis for both the transitional and the physical risks/opportunities in terms of the 1.5/2°C and 4°C scenarios, respectively, based on the Representative Concentration Pathways (RCPs) and Shared Socioeconomic Pathways (SSPs) provided by the Intergovernmental Panel on Climate Change (IPCC).
Regarding risk analysis, in the 1.5/2°C scenario, the elements associated with the transition to a decarbonized society — such as policy, regulation, technology, market, and consumer perceptions - were considered. In the 4°C scenario, which includes no proactive measures against climate change, the physical factors related to the acute or chronic phenomena caused by the rise in temperature were analyzed — such as, for example, floods and water shortages.
As for the opportunities, in the 1.5/2°C scenario, high awareness by consumers means there is a market for sustainable brands and products. Similarly, the 4°C scenario identifies sales opportunities for products that can help people to live with high temperatures. At Shiseido, we aim to leverage these findings — by mitigating risks and by making the most of the opportunities to provide sustainable products to consumers and promote our beauty innovations.
We identified carbon taxes, changes in the market and consumer perceptions, floods, and water shortages as the influential risk factors, and quantified their financial impacts in 2030.
In 2020, we assessed and identified the impactful risks by a holistic approach. “Natural and Human-Made Disasters”, and “ESC (Environment, Society, and Culture)”, are listed as the categories related to sustainability.
Climate-related risks are analyzed based on scientific and socio-economic evidence and integrated into the enterprise risk management system as one of the elements related to natural disasters or ESC. The Group’s risks assessment and countermeasures are also periodically reviewed by the Global Risk Management & Compliance Committee, headed by the Group CEO and composed of regional CEOs and executive officers as well as the Executive Committee.
In order to mitigate the physical risks, we use the ratio of our CO₂ emissions as the standard metric. Physical risks are tracked and monitored every year. In particular, we set the target to achieve carbon-neutral operations by 2026 for Scope 1 and Scope 2 emissions. In terms of mitigating market risks and creating opportunities in the 1.5/2°C scenario, we support the concept of a circular economy, and aim to reduce CO₂ emissions and to eliminate single-use plastics with the target of switching to 100% sustainable packaging by 2025. To manage the risk of water shortage in the 4°C scenario, we selected water consumption at our business sites as an indicator and set a target of reducing it by 40% by 2026. As for other physical risks, we will examine appropriate metrics from the viewpoint of long-term risk management.
In April 2019, we announced our support for the Task Force on Climate-related Financial Disclosures (TCFD) and started disclosing the results of climate-related risk analysis based on the TCFD flamework. In addition to the results of the qualitative analysis of risks and opportunities which we disclosed in 2020, we also released our quantitative risk analysis and identified major areas where we will take action.
We will make dedicated efforts to mitigate risks by planning actions in cooperation with our businesses, and integrating them into our management and business strategies. In addition, we will disclose initiatives that lead to new opportunities as well as risk mitigation through our value chain. At the same time, we will also improve our analysis based on the latest scientific evidence.
Fig 1. Risks and Opportunities Identified by the Scenario Analysis
(Seen mainly in the 1.5/2°C scenario)
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(Seen mainly in the 4°C scenario)
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☑ Risk factor analyzed qualitatively and quantitatively.
Quality water allows us to produce quality products. It supports every aspect of our cosmetics business, including the development of water-containing products such as lotions; the growth of plants as raw materials; temperature control; and equipment cleaning at production sites.
Post-production, water is essential for rinsing during hair and face washing. It also plays a key role in the disposal and recycling process.
In early 2020, we set a target of reducing our group-wide water consumption by 40%* by 2026. In order to achieve this target and ensure sustainable use of water, we are proceeding with efforts based on careful analysis of water usage.
At factories, which consume a large amount of water, we have been engaged in water-saving activities since the start of operations. This involves the use of automatic cleaning equipment at manufacturing facilities, and setting up equipment-cleaning locations for efficient water use.
We are also introducing water reclamation equipment at our factories that enables water to be recycled and reused. As a result of our ongoing efforts, water consumption was reduced by 16% in 2020 (compared to 2014).
We are working to reduce water consumption at all our factories. At our Osaka factory (Japan), we reconsidered existing cooling methods and remodeled certain equipment. By introducing a circulation-type system that can recycle used water, we reduced water consumption by 8% per year. At our Kuki factory (Japan), we have introduced a water-saving washer for cleaning tanks and drums used for cosmetics storage and transportation. The machine uses a flexible nozzle and automatic controls, while cleaning patterns can be optimized according to residue and container type. This allows for 90%water reduction per cleaning. At the same factory, we have also developed a new cleaning agent for sunscreen products that are difficult to remove from storage tanks and manufacturing equipment. The new cleaning agent ensures a reduction in both cleaning times and water consumption.
Finally, at our Gien factory (France), we switched from water to alcohol for cleaning our fragrance product manufacturing equipment and resin skids. All alcohol used in the process is recycled. This has enabled us to use water more efficiently, leading to an 81% reduction in water consumption at this factory compared to 2009.
Water is a shared resource, jointly managed by various stakeholders at different stages of the river basin. In collaboration with local stakeholders, we promote “water stewardship”* as a common property through drainage methods and secondary use.
We use the abundant, high-quality groundwater for manufacturing processes and as a raw material for cosmetics. At our Nasu factory (Japan), we are working to recycle groundwater by supplying clean, treated wastewater to local agriculture.
While waste management and processing methods differ by country or region, the culture of effectively recycling or reusing resources has been nurtured at all Shiseido factories. We have been working on recycling and reusing waste for many years, promoting thorough waste management with careful sorting of materials before disposal.
We achieved zero emissions* at our domestic factories in 2003, and zero landfill in all 12 factories worldwide in 2020. This was made possible by continuous recycling of resources and careful separation and collection of waste.
In our Osaka factory (Japan), we contribute to resource circulation by using plastic compactors to convert waste plastics into recyclable materials. At our Kuki factory (Japan), we changed the dehydration method to reduce the amount of sludge discharged by wastewater treatment, switching from a drying method to a screw-pressing method that helps to save energy and reduce 250 tons of waste. We also manage our stock effectively by improving our estimations of demand and using excess stock.
In 2020, we held online seminars for all managers and employees in charge of industrial waste in Japan. The aim was to share knowledge and ensure understanding and compliance with laws and regulations. A total of 164 employees attended these seminars.
With the help of our original compliance checklist, each participant can identify how to effectively manage waste. As a result of these activities, there were no accidents or legal violations associated with waste in 2020.