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 GHG emissions through energy-saving activities at its plants and offices and the introduction of electricity derived from renewable energy sources.

As an expression of our commitment to climate change mitigation, we have joined the “Climate Change Initiative” and endorsed the TCFD recommendations in 2020. In 2022, we have revised the Group's CO2 emission reduction targets (Scope 1, Scope 2, and Scope 3) and obtained SBT certification for the revised targets. In addition, measures to respond to large-scale disasters due to climate change are stipulated in our disaster BCP (Business Continuity Plan).

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Climate Change Risks and Opportunities

Governance

The CITIZEN Group has established an environmental management system to efficiently promote environmental management. Under the umbrella of the Sustainability Committee chaired by the chairman of CITIZEN WATCH, we have put in place the Group Environmental Committee chaired by a director (in charge of environmental affairs) who has been appointed by the chairman of the company.

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 Meeting. The content approved by the Management Meeting 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.

The CITIZEN Group Environmental Management System
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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 for identifying the risks and opportunities associated with climate change

Process 1

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

Process 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.

Process 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 the 1.5°C scenario, which is a scenario of moving toward a decarbonized society, and the 4°C scenario, which is a scenario of increasing warming.

SSP1-1.9 was used for the 1.5°C scenario, and SSP5-8.5 for the 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 without implementation of additional climate policies.
Change in global average temperature with reference to 1850-1900
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  • Source: Figure, IPCC AR5 WGⅠ SPM Fig. SPM.7(a)

Scenario Analysis Results

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Classification Significant Risk / Opportunity Impact on CITIZEN Time Horizon
1.5℃ 4℃ -2024 2025
-
2030
2031-
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 risk assessment for both the 1.5°C and 4°C scenarios for which the significance level was determined to be "minor" are not listed.

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 Scopes 1, 2, and 3

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

We compared the 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 CITIZEN Group's current CO2 emitting countries (Japan, Thailand, China, the Philippines, and Vietnam), as the amount varies from country to country.

Scopes 1 and 2

We calculated the business impact for production in 2030, 2040, and 2050 when the carbon tax is introduced.

The CITIZEN Group aims to achieve carbon neutrality by 2050 and has established a roadmap for reducing CO2 emissions (The CITIZEN Group Environmental Goal 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

We calculated the financial impact from the CO2 emissions for Category 1 of Scope 3 and material purchase costs, assuming that all impacts of carbon tax were reflected in the purchase price.

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

Strategy (Measures and Policies of the Company)

We have formulated the "The CITIZEN Group Environmental Vision 2050" to achieve carbon neutrality in 2050. The CITIZEN Group aims to achieve virtually zero CO2 emissions from its factories and offices by 2050. We are also working to understand the risks related to climate change 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 ICP and to improve product competitiveness through the development and production of environmentally friendly products.

Under the 1.5°C scenario,

we anticipate 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 The CITIZEN Group Environmental Target 2030 and The CITIZEN Group Environmental Vision 2050, the Group is considering the introduction of an internal carbon price system to promote investment in GHG emissions reduction.

Under the 4°C 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 weather-related disasters and investment related to disaster countermeasures.

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Classification Significant Risk / Opportunity Impact on CITIZEN Measures Time Horizon
1.5℃ 4℃ -2024 2025
-
2030
2031-
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

In accordance with ISO 14001, the risks and opportunities related to climate 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 environment, and needs and expectations of stakeholders.

Climate-related risks are reflected in the Group's strategy as one of the Group's key risks and are addressed under the supervision of the Board of Directors.

Specific measures to eliminate risks and opportunities are decided at the management meeting attended by directors, after which each measure is implemented by relevant departments under the control of the director in charge of environmental affairs. For cross-group themes, we utilize the established ISO14001 system and the environmental management system that conforms to it, so that we can develop an efficient PDCA cycle.

Indicator and Goal

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

Greenhouse Gas Emissions
Indicator Goal
Scopes 1 and 2 50.4% reduction by FY2030 (compared to FY2018)
Scope 3 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," and will continue to monitor these indicators.

Reduction of Greenhouse Gas Emissions

To achieve the 1.5°C scenario, we are promoting the reduction of GHGs, which are the cause of 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 LEDs, and capital investment to establish “sustainable factories” using manufacturing processes that are environmentally friendly.

In FY2023, the Tokyo Works of CITIZEN WATCH achieved 100% LED lighting with the installation of 1,883 LED lamps, and the Tokorozawa Works is scheduled to achieve 100% LED lighting in FY2024. In addition, all newly constructed Group plants are equipped with solar power generation systems to increase energy self-sufficiency and reduce CO2 emissions. CITIZEN FINEDEVICE headquarters and Kawaguchiko Plant, which started operation in January 2022, have reduced CO2 emissions by 7.7 tons per year, and CITIZEN MACHINERY’s Karuizawa Plant in Nagano Prefecture, which was constructed in April 2023, has reduced CO2 emissions by 220 tons per year. CITIZEN WATCH MANUFACTURING’s Miyota Saku Plant in Nagano Prefecture, which started operation in December 2023, is expected to reduce CO2 emissions by approximately 714.9 tons per year, the largest reduction among the Group’s business sites.

We also calculated Scope 3 emissions for The entire CITIZEN Group in order to reduce GHG emissions throughout the supply chain. As an opportunity, we are working to create new environmentally friendly products, such as watches incorporating the Eco-Drive, in anticipation of the expansion of ethical consumption, which will contribute to solving environmental and social problems.

Scopes 1 and 2 GHG emissions

Scope 1
Graph
Scope 2 (Location-based)
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Scope 1 + Scope 2 (Location-based)
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Scope 2 (Market-based)
Graph
Scope 1 + Scope 2 (Market-based)
Graph

Trends in The CITIZEN Group's GHG Emissions from Non-Energy Sources (CO2 equivalent)

In FY2023, direct emissions of GHGs other than CO2 from energy sources (i.e., nitrogen trifluoride, sulfur hexafluoride, perfluorocarbon, hydrofluorocarbons, nitrous oxide, methane, and CO2 from non-energy sources) totaled 1,677 tons (CO2 equivalent). These accounted for 10% of the total Scope 1 emissions.

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GHG emissions other than CO2
(t-CO2)
  FY2018 FY2019 FY2020 FY2021 FY2022 FY2023
Methane Japan 131.0 158.2 146.6 129.7 98.3 199.9
Overseas - - - - 150.5 237.4
Total 131.0 158.2 146.6 129.7 248.9 437.3
Dinitrogen monoxide Japan 44.9 42.4 30.7 41.9 35.6 69.1
Overseas - - - - 62.6 115.0
Total 44.9 42.4 30.7 41.9 98.2 184.1
Hydrofluorocarbons (HFC) Japan 87.9 21.6 84.0 283.9 633.8 469.8
Overseas - - - - 375.6 436.9
Total 87.9 21.6 84.0 283.9 1009.4 906.7
Perfluorocarbons (PFC) Japan 0.0 0.0 0.0 43.2 30.3 43.0
Overseas - - - - 27.2 84.9
Total 0.0 0.0 0.0 43.2 57.5 127.9
Sulfur hexafluoride (SF6) Japan 28.9 32.9 10.1 36.8 27.0 19.9
Overseas - - - - 0.0 0.0
Total 28.9 32.9 10.1 36.8 27.0 19.9
Nitrogen trifluoride (NF3) Japan 0.0 0.0 0.0 0.0 0.0 0.0
Overseas - - - - 0.0 0.0
Total 0.0 0.0 0.0 0.0 0.0 0.0
Carbon dioxide (CO2) from non-energy sources Japan - - - - 0.1 1.3
Overseas - - - - 0.7 0.0
Total - - - - 0.8 1.3
Total Japan 292.6 255.2 271.4 535.5 825.1 803.0
Overseas - - - - 616.6 874.3
Total 292.6 255.2 271.4 535.5 1441.7 1677.2
  • * The above GHG emissions figures are based on domestic data only until FY2021.
  • * Emissions in Japan are higher than in previous years due to a revision of the calculation method from FY2022.

Calculation of Scope 3 GHG Emissions

In reducing GHG emissions, it is important to understand the GHG emissions (Scope 3) not only at the company's own manufacturing stage, but also throughout the entire supply chain where GHGs are indirectly emitted. Therefore, we calculated the GHG emissions of all The CITIZEN Group operations in FY2022. Based on these calculations, the total indirect GHG emissions of the entire supply chain amounted to approximately 1,651,000 tons. Of these, "products and services purchased" (Category 1) accounted for the largest share, at 57% of the total, followed by "use of products sold" (Category 11) at 35%, which together accounted for about 92% of the total.

Our company calculates Scope 1 emissions based on the procurement amount. In FY2022, emissions in Category 1 increased due to the inflationary pressures that led to higher costs for purchased products (materials and consumables) as well as service expenses. Consequently, the emissions in Category 1 contributed to an overall increase in Scope 3 emissions. In FY2023, we started close communication with our suppliers with the aim of reducing emissions throughout our supply chain to achieve our Scope 3 reduction target (SBT). Additionally, we underwent third-party verification by an external audit agency for the emissions data of FY2022 and received a verification report, covering all business operations within the CITIZEN Group.

Scope 3 Emissions (FY2022)
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Initiatives for Renewable Energy

[Case Study] CITIZEN WATCH

Citizen Watch Co., Ltd. has switched the electricity used at its Tokyo Works where its head office is located and at Tokorozawa Works, to electricity derived from renewable energy sources that is virtually CO2-free, resulting in an annual reduction of approximately 13,000 tons of CO2 emissions. As a result, all electricity used at Citizen Watch Co., Ltd.’'s main domestic works has been switched to renewable energy. The electricity to be introduced has been granted non-fossil certificates designated for renewable energy procured by TEPCO Energy Partner, Incorporated.

[Case Study] CITIZEN FINEDEVICE Install solar panels

CITIZEN FINEDEVICE Kitamimaki Plant

CITIZEN FINEDEVICE has installed solar panels on the premises of its Kitamimaki Plant in Tomi-Shi, Nagano Prefecture, as part of its activities to combat global warming and realize a carbon-free society and began operation on March 27, 2023. The maximum output of the facility is 400 kW, and the projected annual CO2 reduction is “"243.6 tons.” This is equivalent to the amount of CO2 absorbed by approximately 17,400 50-year-old cedar trees. The electricity generated is supplied to the plant’'s factories.

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[Case Study] Installed the largest scale solar power generation system in the Group

CITIZEN WATCH MANUFACTURING Miyota Saku Plant

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 Plant in Saku-shi, Nagano Prefecture, and started operation on December 14, 2023. This will reduce CO2 emissions by approximately 714.9 tons per year. 4,714 solar panels will be installed on the roof of the Miyota Saku Plant. The total panel area is 8,643.2㎡ and annual power generation is 2,033 MWh. Saku-shi has one of the longest hours of sunlight in Japan, and the panels are expected to supply approximately 20.4% of the electricity used at Miyota’s Saku Plant, reducing annual CO2 emissions by approximately 714.9 tons. This will be the largest reduction in CO2 emissions among The CITIZEN Group’s domestic and overseas business sites.

In addition, the plant will be equipped with a central thermography system and heat-shielding glass, and more than 20,000 trees will be planted around the circular design of the site, which resembles a wristwatch.

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[Case Study] Use of geothermal power generation

CITIZEN MACHINERY PHILIPPINES

CMP (CITIZEN MACHINARY PHILIPPINES, INC.), a Philippine subsidiary of CITIZEN MACHINARY, 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.