Sustainability

Information Disclosure in Line with TCFD and TNFD Recommendations

Strategy of Natural Capital (Update：July 2024)

We have employed the LEAP approach recommended by TNFD as an integrated analytical approach for natural capital-related evaluation. The LEAP approach consists of four phases: Locate (The interfaces with nature), Evaluate (Dependencies and impacts on nature), Assess (Nature-related risks and opportunities), and Prepare (To respond and report).

Scope and Period of Analysis

• ●Scope of Analysis：Agrochemicals in the Agricultural Chemicals business
  （Some of the risks/opportunities cover other businesses）
• ●Period of Analysis：2030 and 2050

Analysis Process Based on the LEAP Approach

Locate: Identify priority areas

We analyzed and assessed specific areas related to the Group’s business activities using tools like the WWF Biodiversity Risk Filter to locate interfaces between the Company and nature and identify our priority areas.

As agrochemicals use petroleum, natural gas, and various minerals as raw materials, the Company manufactures finished products through materials extracting and processing and the production of intermediate products. In light of Japan’s import conditions and the world’s reserves of those resources, the value chain (VC) upstream (extracting and processing raw materials) is considered to have been mostly carried out in overseas countries, such as Saudi Arabia, the UAE, Australia, China, Canada, and Peru. Accordingly, we find it difficult to locate specific oil and gas fields, minerals, and processing plants; however, some locations are highly likely to correspond to the priority areas.

The Company manufactures agricultural chemicals at the Onoda Plant, the Saitama Plant, and the plants of NC Agro Hakodate Corporation and Nissan Bharat Rasayan PVT. LTD. (India). Considering our business activities’ dependencies and impacts on nature, we recognize the importance of the “Sensitive Locations” criteria defined in TNFD. Therefore, we have identified the following locations as our priority areas.

Tools used: WWF Risk Filter Suite、Global Forest Watch map

zoom

Evaluate: Identify and evaluate nature-related dependencies and impacts

The value chain of agricultural chemicals comprises materials sourcing and processing, production of intermediate products, manufacturing of finished products by the Company, and the use of products in agriculture. Employing ENCORE*, we identified and evaluated each process’s nature-related dependencies and impacts to prepare a heatmap, as shown below.

• ENCORE(Exploring Natural Capital Opportunities, Risk ad Exposure)

ENCORE is a tool jointly developed by the Natural Capital Finance Alliance (NCFA), an international network of financial institutions, and the United Nations Environment Programe World Conservation Monitoring Center (UNEP-WCMC). Using this tool, companies can explore dependencies and impacts on nature by each sector, sub-industry, and production process (under GICS or the Global Industry Classification Standard).

Legends： very high, high, moderate, low, very low.
Tool used: ENCORE

• 1 Ventilation：Ventilation provided by natural or planted vegetation that is vital for good indoor air quality
• 2 Filtration：Filtration, sequestration, storage, and accumulation of pollutants by plants, animals, algae
• 3 Climate regulation：Long-term storage of carbon dioxide in soils, oceans, etc., and regulation of temperature, humidity, wind speed, etc., by vegetation

zoom

Legends： very high, high, moderate, low, very low.
Tool used: ENCORE

zoom

＜Summary of identification and evaluation of nature-related dependencies and impacts＞

• In the value chain upstream (particularly in the materials sourcing process), the dependencies on groundwater, surface water, water cycle, water quality, climate regulation, and protection from floods and storms are relatively high.
• In the process of manufacturing by the Company, the dependencies on ecosystem services are low.
• Through the entire value chain, the impacts on water use, GHG emissions, air, water, and soil pollution are high.
• In the value chain upstream, the impacts on water use and the use of terrestrial/freshwater/marine ecosystems are very high.

Assess: Identify and assess risks and opportunities

Taking into consideration our priority areas identified in the “Locate” phase and the dependencies and impacts identified and evaluated in the “Evaluate” phase, we identified and assessed nature-related risks and opportunities projected to affect the Company’s businesses.

zoom

＜Scenario Analysis＞

On analysis, referring to the TNFD guidance, we prepared the figure below to project future nature-related outcomes in four (4) scenarios. The chart’s vertical axis shows the degree of degradation of ecosystem services (environment) in the cases of the less degraded 1.5°C scenario and the more degraded 4°C scenario (in terms of climate changes), indicating physical risks and opportunities. The horizontal axis shows the stringentness of enhancing regulations and the growth of the market need for environmental conservation, indicating transition risks and opportunities.

• ●Referenced Scenarios

1.5°C Scenario*1	4°C Scenario*2
・IEA-WEO*3, ETP*4 Net Zero Scenario (NZE) ・IPCC SSP*5　1-1.9, 1-2.6	・IEA-WEO Stated Policies Scenario (STEPS) ・IPCC SSP5-8.5

• *1The scenario where necessary measures are implemented to keep the increase in global average temperature below 1.5°C above pre-industrial levels.
• *2The scenario where the global average temperature increases by 4°C above the pre-industrial levels at the end of the 21st century.
• *3International Energy Agency “World Energy Outlook” (2022)
• *4International Energy Agency “Energy Technology Perspectives” (2023)
• *5Intergovernmental Panel on Climate Change (IPCC) “Shared Socio-economic Pathway”

Scenario(1)：Sustainable society where the richness of humans and nature can coexist

It is a society that the Company/Group aims for. We will pursue sustainable management to enable our businesses to continue while preserving the environment. In the Agricultural Chemicals business, we have set our goals, “the stable supply of foods” and “sustainable agriculture,” based on the long-term management plan “Atelier2050.”

Scenario(2)：A society forced to address serious environmental changes

As future changes in natural capital are uncertain, there is a probability that the degradation of ecosystem services will not be curbed, and people will have to face an immediate tightening of regulations and drastic changes in policies.

Scenario(3)：A society where environmental consideration is not given priority regardless of further environmental deterioration

There is a probability that even though ecosystem services are further degraded, environmental regulations will not be enhanced without change in the market; thereby, the ecosystem services will seriously deteriorate. As a result, society will suffer substantial damage to economic activities.

Scenario(4)：Conventional society where environmental risks are not apparent

As future changes in natural capital are uncertain, there is also a probability that ecosystem services will not deteriorate till 2030, and social conditions will not change as much as anticipated. However, it is certain that the loss of biodiversity and environmental changes, such as climate change, will advance gradually, and environmental risks are considered to become evident by 2050 in the long view. In that case, society will likely shift to it in scenarios (2) or (3); therefore, we will take countermeasures for risks and opportunities as described in (2) and (3).

＜High-impact risks/opportunities and countermeasures＞

zoom

Metrics and Targets of Natural Capital (Update：July 2024)

For agricultural chemicals, the Kunming-Montreal Global Biodiversity Framework adopted in December 2022 set its global targets, including “reducing the overall risk from pesticides and highly hazardous chemicals by at least half (by 2030).” In addition, the Ministry of Agriculture, Forestry and Fisheries of Japan (MAFF) launched the “Strategy for Sustainable Food Systems, MIDORI,” under which MAFF aims to develop innovative technologies to realize a “50% reduction in risk-weighted use of agrochemicals.”

Although agricultural chemicals entail environmental risks, their appropriate use helps increase harvest efficiency and prevent deforestation caused by excessive farmland expansion. Furthermore, we will contribute to biodiversity conservation by properly managing and revitalizing abandoned farmland. Specifically, the “stable supply of food” and “sustainable agriculture” are clearly stated in the Group’s long-term management plan, “Atelier2050,” and the mid-term “Vista2027,” as future directions to pursue in the Agricultural Chemicals business. To achieve those goals, we need to tackle agricultural subjects, including “reduction of environmental risks,” “improvement of yields,” and “Management of Farmland and Green Space.”

Metrics, Mid-term and Long-term Targets

Under the long-term management plan “Atelier 2050” and the mid-term management plan “Vista 2027,” we currently have the following mid-term and long-term goals for reducing environmental risks.

We will disclose other indicators in the future, referring to the core disclosure indicators related to dependence/impact and risk/opportunity recommended in the TNFD Framework. In addition, we will work to reduce our environmental impact.

• 1　Percentage change from the previous year
• 2　Nissan Chemical and its consolidated subsidiaries related to agrochemical production（NC Agro Hakodate Corporation, Nissan Bharat Rasayan PVT. LTD.）
• 3　Water returned to the source of extraction at similar or higher quality as raw water extracted
• 4　Industrial waste: Neutralization, crushing, dehydration, mechanical drying, etc.
  Specially controlled industrial waste: Neutralization, oil-water separation, dehydration, etc.
• 5　Significant Violations to environmental laws and regulations

Indicator	Scope	Unit	FY2022	FY2023
Fines or penalties related to violations to environmental laws and regulations	Consolidated	Yen	0	0