Responding to Climate Change

As a measure to mitigate climate change, one of the most serious global environmental risks, The CITIZEN Group is making Group-wide efforts to reduce greenhouse gas (GHG) emissions by conducting energy-saving activities at its factories and offices, introducing electricity derived from renewable energy sources, and improving the efficiency of energy use.

As an expression of our commitment to climate change mitigation, we have joined the Japan Climate Initiative and declared our support for the Task Force on Climate-related Financial Disclosures (TCFD) recommendations in 2020. In 2022, we revised the Group's Scope 1, Scope 2, and Scope 3 CO2 emission reduction targets, which were validated as science-based targets by the Science Based Targets initiative (SBTi) in 2023. Furthermore, in 2025, we joined RE100, an initiative to achieve 100% renewable electricity in members' business activities. In addition, measures to respond to large-scale disasters due to climate change are stipulated in our disaster Business Continuity Plan (BCP).

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Climate Change Risks and Opportunities

Governance

The CITIZEN Group has established an environmental management structure to efficiently promote environmental management. Under the umbrella of the Sustainability Committee, chaired by the president of CITIZEN WATCH, we have put in place the Group Environmental Committee, chaired by an executive in charge of environmental affairs who has been appointed by the president.

Climate change issues are discussed by the Group Environmental Committee, followed by discussions by the Sustainability Committee, and are then deliberated and approved by the Management Committee. The content approved by the Management Committee is reported to the Board of Directors on a regular basis (twice a year) and is used for decision-making on environmental risks and environmental investments. In addition, the key performance indicators (KPIs) for performance-linked stock compensation for directors and executive officers (excluding directors who are audit and supervisory committee members, outside directors, and non-residents in Japan) include the rate of reduction in CO2 emissions as a non-financial indicator related to ESG.

The CITIZEN Group Environmental Management Structure
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Scenario Analysis

Recognizing that the risks and opportunities associated with climate change will have a significant impact on its business strategy, The CITIZEN Group has identified the risks and opportunities associated with climate change through the following process, and the Sustainability Committee Secretariat took the lead in analyzing and assessing the significance of the 1.5°C and 4°C scenarios.

Process of Identifying Climate-Related Risks and Opportunities

Step 1

We comprehensively identified the risks and opportunities associated with climate change.

Step 2

We organized the identified risks and opportunities in relation to the four business segments of Watches and Clocks, Machine Tools, Devices, and Electronic Devices and Others, as well as in three time frames: short, medium, and long term.

Step 3

For each risk and opportunity identified, we used a 5-point scale to evaluate its impact on the company and likelihood of occurrence. As an overall evaluation, items with a high impact on the company and likelihood of occurrence were extracted, and important risks and opportunities were identified.

Selected Climate Change Scenarios

We analyzed and evaluated a 1.5°C scenario, which envisions transition toward a decarbonized society, and a 4°C scenario, which envisions increasing global warming.

SSP1-1.9*1 was used as a 1.5°C scenario, and SSP5-8.5*2 as a 4°C scenario.

  • * SSP1-1.9: Assumes that warming is controlled to about 1.5°C above 1850-1900 levels by 2100 "after a slight overshoot" and that CO2 is reduced to net zero around the middle of this century.
  • * SSP5-8.5: High-level reference scenario for the situation without implementation of additional climate policies
Change in global average temperature with reference to 1850-1900
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  • Source: Figure SPM.7 (a) in the Summary for Policymakers (SPM), Intergovernmental Panel on Climate Change Assessment Report 5 (IPCC AR5) – Working Group I (WGI)

Scenario Analysis Results

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Classification Significant Risk / Opportunity Impact on CITIZEN Time Horizon
1.5℃ 4℃ Short term Medium term Long term
Transition Risk Policy and Regulations Large Small
  • Cost increase due to the introduction and strengthening of new regulations (carbon pricing system)
 
Technology and Markets Small Large
  • Increase in the cost of raw materials, etc., supply shortages and supply disruptions
 
Reputation Medium Small
  • Decline in reputation due to a delayed response to climate change, etc., and the consequent decline in stock price and sales
Physical Risk Acute Risk Small Large
  • Increasing severity and frequency of natural disasters
 
Chronic Risk Medium Large
  • Increased business spending on addressing extreme weather effects and countermeasures 
 
Small Medium
  • Stagnation of production activities due to supply chain disruptions
 
Opportunity Energy and Resource Efficiency Large Small
  • Cost reduction through the promotion of energy conservation
 
Medium Medium
  • Cost reduction through resource conservation, 3Rs, zero waste emissions, and the conservation of water resources
Medium Small
  • Differentiation and competitiveness through product development with alternative materials
  • Realization of life cycle decarbonization through substance substitution and weight reduction
 
Products, Services & Markets Medium Small
  • Revenue growth due to increased demand for environmentally friendly products/services
Resilience Medium Medium
  • Increased customer trust through the promotion of natural disaster preparedness
Medium Large
  • Minimized the risk of physical damage through the systematic implementation of countermeasures
  1. * The results of the assessment of risks that have been determined to be “small” based on both the 1.5°C and 4°C scenarios are not listed.
  2. * The short term spans up to three years, and the medium term spans more than three years and up to six years from now (which roughly corresponds with the period for Citizen Group Environmental Goals 2030), while the long term spans over six years from now (which roughly corresponds with the period for Citizen Group Environmental Vision 2050).

Financial Impact Analysis

Based on the results of the scenario analysis, we have identified financial impacts for the following two items that could significantly affect The CITIZEN Group’s finance.

Transition Risk
Cost increase due to the introduction and strengthening of new regulations
Transition Risk
Increase in the cost of raw materials, etc., supply shortages, and supply disruptions

Through the introduction of ICP, we will promote appropriate low-carbon investment and raise awareness among employees.

Impact of Introducing the Carbon Tax on Scope 1, 2, and 3 Emissions

The financial impact of the carbon tax was estimated based on the following calculation criteria.

We compared the International Energy Agency (IEA)'s carbon price projections for each scenario with the financial impact if The CITIZEN Group's CO2 emissions reduction targets were achieved or not achieved. The cost of the carbon tax was calculated based on the carbon taxes in the countries where The CITIZEN Group emits CO2 (Japan, Thailand, China, the Philippines, and Vietnam), as the amount varies from country to country.

Scope 1 and 2 emissions

We estimated the likely impact of any carbon tax on our production operations in 2030, 2040, and 2050.

The CITIZEN Group aims to achieve carbon neutrality by 2050 and has established a roadmap for reducing CO2 emissions (CITIZEN Group Environmental Goals 2030). Taking these as a standard, we set the CO2 emissions for each year and calculated the financial impact.

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(JPY Million)
2030 2040 2050
If the CO2 emission reduction targets are achieved 1,096 905 0
If the CO2 emission reduction targets are not achieved 1,398 2,310 2,877

図
Scope 3 emissions

We estimated the financial impact of any carbon tax, using the bases of our Scope 3 Category 1 CO2 emissions and material purchase costs, on the supposition that a cost increase due to the carbon tax will be passed on to the purchase prices.

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(JPY Million)
2030 2040 2050
813 1,897 2,981

Strategy (Measures and Policies of the Company)

We have formulated CITIZEN Group Environmental Vision 2050 with a view to achieving carbon neutrality by 2050. The CITIZEN Group aims to achieve virtually zero CO2 emissions from its factories and offices by 2050. We are also working to identify climate-related risks throughout our supply chain.

The Group sees the transition to a low-carbon economy as an opportunity to invest in renewable energy and energy-saving equipment, and it is also working to promote low-carbon financing through the introduction of internal carbon pricing (ICP) and to improve product competitiveness through the development and production of environmentally friendly products.

1.5°C scenario,

This scenario envisions increased costs due to stricter regulations, including the introduction of a carbon tax, and the risk of higher prices for raw materials and other resources. In addition to promoting decarbonization initiatives to achieve CITIZEN Group Environmental Goals 2030 and CITIZEN Group Environmental Vision 2050, the Group is considering the introduction of an internal carbon price system to promote investment in GHG emissions reduction.

4°C scenario,

Under this scenario, in order to stably secure raw materials, we will promote diversified procurement sources and appropriate parts and materials procurement management. In addition, we are promoting BCP measures, including those for weather-related disasters, and investment related to disaster countermeasures.

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Classification Significant Risk / Opportunity Impact on CITIZEN Measures
1.5℃ 4℃
Transition Risk Policy and Regulation Large Small
  • Cost increase due to the introduction and strengthening of new regulations (carbon pricing system)
  • Promotion of decarbonization efforts (achievement of The CITIZEN Group Environmental Goal 2030)
  • Introduction of an internal carbon price system to promote investment in GHG emissions reduction
Technology and Market Small Large
  • Increase in cost of raw materials, etc., supply shortages and supply disruptions
  • Secure diversified procurement sources
  • Reinforcement of stockpiling function
Reputation Medium Small
  • Decline in reputation due to a delayed response to climate change, etc., and the consequent decline in stock price and sales
  • Enhance corporate value by promoting ESG
Physical Risk Acute Risk Small Large
  • Increased severity and frequency of natural disasters
  • Establishment of specific action guidelines in the event of a disaster
Chronic Risk Medium Large
  • Increased business spending on addressing extreme weather effects and countermeasures
  • Risk assessment of the entire supply chain
  • BCP measures, including weather-related disasters (e.g. disaster countermeasures at production sites, development of BCP plans for procurement/logistics systems, etc.)
  • Promotion of investment related to disaster preparedness
Small Medium
  • Stagnation of production activities due to supply chain disruptions
  • Risk assessment of the entire supply chain
  • BCP measures, including weather-related disasters (e.g. disaster countermeasures at production sites, development of BCP plans for procurement/logistics systems, etc.)
  • Reinforcement of stockpiling functions
Opportunity Energy and Resource Efficiency Large Small
  • Cost reduction through the promotion of energy conservation
  • Conversion to energy-efficient equipment and the more efficient use of electricity through the use of AI and IoT
Medium Medium
  • Cost reduction through resource conservation, 3Rs, zero waste emissions, and the conservation of water resources
  • Capturing business opportunities through the expansion of circular economy businesses
  • Utilization of recycled resources
Medium Small
  • Differentiation and competitiveness through product development with alternative materials
  • Realization of life cycle decarbonization through substance substitution and weight reduction
  • Product development with alternative materials
  • Weight reduction and the diversification of raw materials
Products, Services & Markets Medium Small
  • Revenue growth due to increased demand for environmentally friendly products/services
  • Provision of products and services that contribute to climate change mitigation (eco-driving, LED lighting)
Resilience Medium Medium
  • Increased customer trust through the promotion of natural disaster preparedness
  • Risk assessment of the entire supply chain
  • BCP measures, including weather-related disasters (e.g. disaster countermeasures at production sites, development of BCP plans for procurement/logistics systems, etc.)
  • Reinforcement of stockpiling functions
Medium Large
  • Minimized the risk of physical damage through the systematic implementation of countermeasures
  • Risk assessment of the entire supply chain
  • BCP measures, including weather-related disasters (e.g. disaster countermeasures at production sites, development of BCP plans for procurement/logistics systems, etc.)
  • Reinforcement of stockpiling functions

Risk Management

The CITIZEN Group has established a Group risk and crisis management system to consolidate and promptly address risks with the aim of promoting sustainable management and ensuring the achievement of the Group-wide business goals and sustainable development. Of the significant risks, we regard environmental risks among the most significant, and we work to identify risks of this kind and strengthen countermeasures against them.

In accordance with ISO 14001, climate-related risks and opportunities are identified once a year by the environmental manager and the secretariat on a short- to long-term timeline, based on the environmental aspects, laws and regulations to be complied with, issues in the external and internal environments, and needs and expectations of stakeholders.

Climate-related risks are reflected in the Group's strategy as those among Group Significant Risks and are addressed under the supervision of the Board of Directors.

Specific measures to eliminate risks and opportunities are decided at the Management Committee attended by directors, after which each measure is implemented by relevant departments under the control of the director in charge of environmental affairs. For Group-wide themes, we utilize the established ISO14001 mechanisms and the environmental management system that conforms to the standard so that we can ensure efficient functioning of the PDCA (plan-do-check-act) cycle.

Indicators and Targets

The CITIZEN Group has set the following targets regarding climate change.

GHG Emissions
Indicator Target
Scope 1 and 2 emissions 50.4% reduction by FY2030 (compared to FY2018)
Scope 3 emissions 30% reduction in Category 1 + Category 11 by FY2030 (compared to FY2018)

The CITIZEN Group has also set cost reductions through the promotion of energy conservation as an indicator for climate-related opportunities and the amount of capital investment in energy conservation and renewable energy as an indicator for capital allocation. We will continue to monitor these indicators.

Reduction of GHG Emissions

To achieve the 1.5°C scenario, we are promoting the reduction of GHGs, which are believed to cause global warming. In addition, we are preparing for the implementation of energy-saving activities at each of the Group's business sites, the introduction of energy-saving equipment and facilities, such as LED lighting, and capital investment to establish “sustainable factories” using manufacturing processes that are environmentally friendly.

In FY2024, we replaced 4,800 fluorescent lights with LED ones at the Tokorozawa Works, achieving a shift to 100% LED lighting at the site. In addition, all newly constructed Group factories are equipped with solar power generation systems to increase energy self-sufficiency and reduce CO2 emissions. CITIZEN FINEDEVICE's headquarters and Kawaguchiko Factory, which started operation in January 2022, have reduced CO2 emissions by 7.7 tons per year, and CITIZEN MACHINERY's Karuizawa Factory in Nagano Prefecture, which was constructed in April 2023, has reduced CO2 emissions by 220 tons per year. CITIZEN WATCH MANUFACTURING's Miyota Saku Factory in Nagano Prefecture, which started operation in December 2023, is expected to contribute to a CO2 emissions reduction of approximately 714.9 tons per year, the largest among the Group's business sites. Moreover, CITIZEN MICRO's Hidaka Factory, which started operation in August 2024, is expected to contribute to a CO2 emissions reduction of approximately 41 tons per year.

We also calculated the overall Scope 3 emissions of The CITIZEN Group in order to reduce GHG emissions throughout the supply chain. We are working to create new sustainable products, represented by Eco-Drive watches in our watches business, taking advantage of the likely opportunity of expanded ethical consumption, which will contribute to solving environmental and social problems.

Scope 1 and 2 GHG emissions

Scope 1
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Scope 2 (location-based)
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Scope 1 + Scope 2 (location-based)
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Scope 2 (market-based)
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Scope 1 + Scope 2 (market-based)
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Trends in The CITIZEN Group's GHG Emissions (CO2 equivalent) from Non-Energy Sources

In FY2024, The CITIZEN Group's direct emissions of GHGs other than CO2 from energy sources (i.e., nitrogen trifluoride, sulfur hexafluoride, perfluorocarbons, hydrofluorocarbons, dinitrogen monoxide, methane, and CO2 from non-energy sources) totaled a CO2 equivalent of 1,595 tons, which accounted for 10% of the Group's total Scope 1 emissions.

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GHG Emissions Other than CO2
(t-CO2)
  FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024
Methane Japan 131.0 158.2 146.6 129.7 98.3 199.7 264.8
Outside Japan - - - - 150.5 237.4 231.5
Total 131.0 158.2 146.6 129.7 248.9 437.1 496.3
Dinitrogen monoxide Japan 44.9 42.4 30.7 41.9 35.6 68.8 76.5
Outside Japan - - - - 62.6 115.0 119.8
Total 44.9 42.4 30.7 41.9 98.2 183.9 196.3
Hydrofluorocarbons (HFC) Japan 87.9 21.6 84.0 283.9 633.8 469.0 408.0
Outside Japan - - - - 375.6 436.9 390.7
Total 87.9 21.6 84.0 283.9 1009.4 905.9 798.7
Perfluorocarbons (PFC) Japan 0.0 0.0 0.0 43.2 30.3 43.0 37.6
Outside Japan - - - - 27.2 84.9 42.5
Total 0.0 0.0 0.0 43.2 57.5 127.9 80.1
Sulfur hexafluoride (SF6) Japan 28.9 32.9 10.1 36.8 27.0 19.9 22.9
Outside Japan - - - - 0.0 0.0 0.0
Total 28.9 32.9 10.1 36.8 27.0 19.9 22.9
Nitrogen trifluoride (NF3) Japan 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Outside Japan - - - - 0.0 0.0 0.0
Total 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Carbon dioxide (CO2) from non-energy sources Japan - - - - 0.1 1.3 1.0
Outside Japan - - - - 0.7 0.0 0.2
Total - - - - 0.8 1.3 1.1
Total Japan 292.6 255.2 271.4 535.5 825.1 801.8 810.8
Outside Japan - - - - 616.6 874.3 784.6
Total 292.6 255.2 271.4 535.5 1441.7 1676.1 1595.3
  • * The above GHG emissions figures for the years up to FY2021 are domestic data only.

Calculation of Scope 3 GHG Emissions

In reducing GHG emissions, it is important to monitor not only the GHG emissions from a company's own manufacturing stage but also indirect GHG emissions from the entire supply chain (Scope 3 emissions). Therefore, we calculated the GHG emissions from all The CITIZEN Group operations in FY2024. Based on these calculations, the total indirect GHG emissions of the entire supply chain amounted to approximately 1,040,000 tons. Among these, emissions from purchased goods and services (Category 1) accounted for 49% of the total Scope 3 emissions, the largest share, followed by emissions from the use of sold products (Category 11) accounting for 40%, which together accounted for about 90% of the total.

In FY2025, we started close communication with our suppliers with the aim of reducing emissions throughout our supply chain, thereby achieving our SBTi-validated Scope 3 emissions reduction target. We will also have the Scope 1, 2, and 3 emissions of all CITIZEN Group businesses for FY2023 verified by a third party in August and September 2025. (A verification report will be published in December 2025.)

Scope 3 Emissions (FY2024)
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Initiatives for Greater Use of Renewable Energy

[Case Study] CITIZEN WATCH

CITIZEN WATCH has switched the electricity used at its Tokyo Works, where its head office is located, and at the Tokorozawa Works to virtually CO2-free electricity derived from renewable energy sources, resulting in an annual reduction of approximately 11,700 tons of CO2 emissions. As a result, all electricity used at the company's main domestic works has been switched to renewable energy-sourced electricity. The electricity we have introduced is granted a non-fossil certificate with a designation as renewable energy-sourced power procured by TEPCO Energy Partner, Incorporated.

[Case Study] CITIZEN FINEDEVICE's Installation of Solar Panels

CITIZEN FINEDEVICE Kitamimaki Works

CITIZEN FINEDEVICE has installed solar panels on the premises of its Kitamimaki Works in Tomi City, Nagano Prefecture, as part of its activities to combat global warming and realize a carbon-free society and began operation on March 27, 2023. With a maximum annual capacity of 400 kW, these solar panels are predicted to contribute to a CO2 emissions reduction of 243.6 tons per year. This is equivalent to the amount of CO2 absorbed by approximately 17,400 fifty-year-old cedar trees. The electricity generated is supplied to the factories on the works.

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[Case Study] Installation of One of the Largest Solar Power Generation Systems in the Group

CITIZEN WATCH MANUFACTURING Miyota Saku Factory

To promote the use of renewable energy to reduce CO2 emissions as a measure against global warming, CITIZEN WATCH MANUFACTURING CO., LTD. introduced a solar power generation system at the Miyota Saku Factory in Saku City, Nagano Prefecture, and started operation on December 14, 2023. This will contribute to a CO2 emissions reduction of approximately 714.9 tons per year. The solar panels installed on the roof of the Miyota Saku Factory total 4,714, with a total surface area of 8,643.2 m2 and an annual capacity of 2,033 MWh. Saku City is one of the cities with the longest hours of sunlight in Japan, and the panels are expected to supply approximately 20.4% of the electricity used at the Miyota Saku Factory. An annual CO2 emissions reduction of approximately 714.9 tons will be the largest achieved at The CITIZEN Group's domestic and overseas business sites.

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[Case Study] CITIZEN MICRO's Installation of Solar Panels

CITIZEN MICRO Headquarters and Hidaka Factory

Placing high importance on making a positive contribution to the environment, CITIZEN MICRO is making an active commitment to building a sustainable future. As part of such efforts, the company installed solar panels on the roof of its Hidaka Factory in August 2024. These 213 solar panels are capable of generating 110 MWh of electricity per year, which is expected to contribute to a CO2 emissions reduction of approximately 41 tons per year.

In addition to the abovementioned initiative, since September 2024, the Hidaka Factory and the Chichibu Factory have switched all the electricity they use to renewable power with virtually zero CO2 emissions. These initiatives have the effect of reducing the total CO2 emissions of both factories by approximately 277 tons per year, calculated based on their total annual electricity consumption of 714 MWh.

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[Case Study] Use of Geothermal Power Generation

CITIZEN MACHINERY PHILIPPINES

CITIZEN MACHINERY PHILIPPINES, INC. (CMP), a Philippine subsidiary of CITIZEN MACHINERY, purchases electricity used at its business sites from an electricity supplier that generates 100% geothermal power, achieving zero CO2 emissions from electricity generated from naturally occurring energy.