Public Declaration of Support for Task Force on Climate-Related Financial Disclosure
Information Disclosure Based on TCFD Recommendations
Transition Plan concerning Climate Change
The USS Group has established a Transition Plan (Roadmap) for measures to combat climate change. The implementation of this plan started in June 2023 following discussions and approval by the Board of Directors. The information presented here is a summary of the USS Group's activities. More information is in the "Disclosure of Information Based on the TCFD Framework."
| Item | Explanation |
|---|---|
| Targets | The GHG emission reduction targets for the fiscal year ending in March 2031 are a reduction of 42% for the sum of Scope 1 and 2 emissions and a reduction of 25% for Scope 3 emissions from the level of these emissions in the fiscal year that ended in March 2022. USS has obtained the approval of these targets by the Science Based Targets initiative. |
| Scope 1 + 2 emissions reductions |
Two activities will be required for lowering GHG emissions that result directly from operations of the USS Group: energy conservation and the use of renewable energy. For renewable energy, the USS Group is installing solar power facilities at its business sites because new sources of renewable energy contribute to progress involving the decarbonization of society. Solar panels are placed on the roofs of auction buildings and use power purchase agreements. Solar power generation has started at the Nagoya Auction Site and R Nagoya Auction Site. Activities are under way to prepare for the installation of solar power facilities at other auction sites. |
| Scope 3 emissions reduction |
Approximately 95% of the GHG emissions across the USS Group's value chain are classified as Scope 3. Consequently, lowering these emissions will require the cooperation of a large number of stakeholders outside the group. The GHG Protocol defines 15 categories of Scope 3 emissions. At the USS Group, emissions associated with the use of products sold, which is category 11, account for about half of all Scope 3 emissions. Furthermore, the share of emissions from products and services that are purchased, which is category 1, is about 23%. As a result, emission reduction measures will focus on these two categories. The reduction of Scope 3 emissions is an important issue for the USS Group and society. Lowering these emissions will therefore require engagement with customers and suppliers. Activities have started for collecting emissions data from suppliers in some categories. There will also be educational activities and engagement campaigns accompanied by the sharing of information about various issues with customers and suppliers. |
| Upcoming activities |
To increase the accuracy of the transition plan, the road map that is the key element of the plan will be updated as necessary based on changes in the internal and external environment for the operations of the USS Group. Furthermore, the Board of Directors will receive progress reports about the transition plan in order to allow the directors to supervise activities involving the plan properly. |
◆Transition plan (Roadmap) to achieve goals
Transition Plan concerning Climate Change
Basic Stance
The USS Group has established a Transition Plan (Roadmap) for measures to combat climate change. The implementation of this plan started in June 2023 following discussions and approval by the Board of Directors. The information presented here is a summary of the USS Group's activities. More information is in the "Disclosure of Information Based on the TCFD Framework."
Main Climate Change Initiatives
| Initiative | |
|---|---|
| FY3/22 | Participation in the CDP climate change questionnaire |
| FY3/23 | Disclosure satisfying the TCFD recommendations |
| FY3/24 | Transition plan added to TFCD disclosure |
Detailed Overview of TCFD Financial Disclosures
| Recommendation | Description |
|---|---|
| Governance |
Oversight of the Board of Director
The Board of Directors is responsible for overseeing and monitoring the initiatives and targets set to overcome climate related challenges. To do so, the president and representative director provides reports to the Board of Directors on climate-related risks and opportunities at least once per year. The Board of Directors considers all necessary climate-related risks and opportunities when determining Group management strategies, plans, annual budgets, profit targets, and all other relevant corporate matters. New External ESG Rating for Assessing Officer RemunerationThe General Meeting of Shareholders approved a resolution to revise the Officer Remuneration Policy on June 21, 2022. The amendments to this policy integrate external ESG ratings (MSCI ESG Rating and CDP climate change) as non-financial indicator to determine performance-linked stock remuneration. Manager in charge of climate-related oversightThe president and representative director oversees Group management in its evaluation and adaption to the climate-related risks and opportunities which impact its businesses. To minimizes climate-related risks and maximize climate-related opportunities, we incorporate those that impact our businesses into policies, strategies, plans, budgets, and targets at least once a year. We also set climate-related key performance indicators (KPI) to review and monitor progress. The president and representative director reports leads these efforts as the manager in charge of climate-related oversight, while reporting to and receiving guidance from the Board of Directors at least once a year. |
| Strategy |
Identification and assessment of climate-related risks and opportunities
USS has identified, assessed, and prioritized climate-related transition and physical risks as well as opportunities. We have also created specific climate-related scenarios to gain even greater insight into these risks and opportunities. Scenario analysisPlease see "Overview of Scenario Analyses" and "Impact Assessments and Response Strategies" for more information. |
| Risk management |
Framework to identify and evaluate climate-related risks and opportunities
As the manager in charge of climate-related matters, the president and representative director leads relevant departments and Group companies in identifying and understanding climate-related risks and opportunities. Our approach leverages a defined risk management framework to make headway. The president and representative director shares this progress with the Board of Directors at annual and extraordinary meetings. The Board of Directors uses these reports to monitor risk management progress as well as the initiatives and targets set to overcome various challenges. Climate-related risk management frameworkAs the manager in charge of climate-related risks, the president and representative director reports and advocates initiatives to combat climate change to the Board of Directors. This includes the planning, proposal, and oversight of a risk management framework to identify, evaluate, and address its Group-wide impact. The Board of Directors has the duty to deliberate on and assess the overall risks presented by climate change using what has been learned from the reports and proposals presented by the president and representative director at these annual and extraordinary meetings. The Board of Directors will also create risk management policies and strategies to minimize risks from a Group-wide perspective. It will also properly incorporate those policies and strategies into plans, budgets, and targets. |
| Indicators and targets |
The USS Group has set a CO2 emissions reduction target equivalent to the SBT standard as a goal to be used in managing climate-related risks and opportunities. *Obtained SBT certification in October 2023 To reach our greenhouse gas (GHG) reduction targets, we will promote solar power generation and shift to CO2-free electricity. CO2 emission reduction target （Base year： FY3/22）*target equivalent to the SBT standard （Obtained SBT certification in October 2023） ＜Total emissions of Scope 1 and 2＞42% reduction by FY3/31 ※The base year for the reduction target has been changed to the year ended March 31, 2022.
|
Overview of Scenario Analyses
USS identifies climate-related risks and opportunities with the potential to greatly impact not only our businesses but also our stakeholders. Two of our climate-related scenarios give us insight into future. The first is a low-carbon economy with a 1.5°C or lower scenario. The second is a business-as-usual scenario. Through the data (parameters) rooted in these scenarios and internal and external information, we assess the business and financial impact of climate-related risks and opportunities.
Notes:
1. Scope: Auto Auction business and its entire supply chain
2. Target period: Now until 2050
3. Scenario analyses: Please refer to the table below.
| 1.5℃ Scenario | Business-as-Usual Scenario | |
|---|---|---|
| Overview of scenario |
1. Stronger laws and government regulations
Rapid emissions reductions toward carbon neutrality Sharp increase in EV sales ratio (passenger cars) |
1. Delay in global EV adoption
Global EV sales ratio (passenger cars)
|
| Reference scenarios |
|
|
*1 World Energy Outlook 2022 created by the International Energy Agency (IEA)
https://www.iea.org/reports/world-energy-outlook-2022
*2 AR5 & AR6 created by the Intergovernmental Panel on Climate Change (IPCC)
https://www.env.go.jp/earth/ipcc/5th/
https://www.env.go.jp/earth/ipcc/6th
*3 Climate change forecasts for Japan reference the Climate Change in Japan (2020) report published by the Ministry of Education, Culture, Sports, Science and Technology and the Japan Meteorological Agency
https://www.data.jma.go.jp/cpdinfo/ccj/index.html
1.5°C or Lower Scenario
Business-as-Usual Scenario
Impact Assessments and Response Strategies
1. Impact assessment of carbon tax introduction (Risk)
1-1) Increasing Businesses Costs Due to Carbon Taxes and Pricing
In order to achieve the Paris Agreement, Japan has made an international commitment to reduce greenhouse gas emissions by 46% by 2030 and to achieve carbon neutrality by 2050, and in order to achieve these goals, "The Basic Policy for the Realization of GX" has been announced.
In the policy, the introduction of a levy on carbon has been announced, and there is a possibility of expanding the scope of the levy and increasing the level of burden in the future.
1-2) Financial Impact
USS has calculated the potential financial impact of carbon taxes (carbon pricing). The 1.5°C Scenario has a potential financial impact of ¥300 million by 2030 and ¥540 million by 2050. The Business-as-Usual Scenario has a potential financial impact of ¥190 million by 2030 and ¥240 million by 2050.
<1> Important parameters (indicators) taking into account the financial impact in 2030 and 2050
| Scenarios | 1.5℃ Scenario | Business-as-Usual Scenario | |||
|---|---|---|---|---|---|
| Year | 2030 | 2050 | 2030 | 2050 | |
| Without achieving GHG emission reduction targets | Carbon tax(billions of yen) | 3.0 | 5.4 | 1.9 | 2.4 |
| When achieving GHG emission reduction targets | Carbon tax(billions of yen) | 1.7 | 3.1 | 1.1 | 1.4 |
| Difference | Tax liability (billions of yen) | 1.3 | 2.3 | 0.8 | 1.0 |
| Carbon tax and pricing (US$ per t-CO2) | 140 | 250 | 90 | 113 | |
(Prerequisites)
- The calculation presumes Japan will put in place a carbon tax with carbon pricing equivalent to nations committed to the IEA WEO 2022 NZE net-zero pledge as well as EU STEPS.
- Conversion: Scope 1 & 2 Emissions for the Fiscal Year Ended March 31, 2022 × Carbon Tax Price
Note: Currency converted at US$1 to ¥130
1-3) Response Strategy
Promoting Solar Power and Other Renewable Energy On-site
USS will employ several response strategies to address the potential impact of carbon taxes. These initiatives have been put in place to not only achieve our CO2 emission reduction targets but also promote on-site renewable energies. These efforts will mitigate our future tax burden. We will continue to devise plans with the highest benefit to the entire Group to achieve swift results.
<2> List of Solar Power Generation Facilities Installed
| Phase Ⅰ | Phase Ⅱ | Phase Ⅲ | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Auction Site |
R Nagoya | Nagoya | Shizuoka | ＪＡＡ | Okayama | Saitama | Kobe | Tokyo | Yokohama |
| Operation start | Jan 2023 | Feb 2023 | Jul 2023 | Aug 2023 | Oct 2023 | Jan 2024 | Decided to introduce | ||
2. Evaluation of effects of increasing EV sales worldwide (Risk, Opportunity)
２-1) USS forecast for the growth of EV utilization
If the use of car sharing services increases as part of measures to achieve a circular economy, there may be a decline in the number of people who own electric vehicles (EV). Another possibility is the decision of EV manufacturers to buy and sell these vehicles within their own supply chains. Either one of these events could reduce the number of vehicles consigned at USS auctions. The graph below is the USS forecast for global sales of automobiles in 2030. For the scenario of a global temperature increase of 1.5˚C, USS forecasts a much larger number of automobile sales in 2030 than in 2020. If sales rise to this level, the supply chains of EV manufacturers alone will probably not be sufficient to handle the large volume of purchases and sales of used vehicles. Furthermore, the increasing use of battery-powered EVs for progress with decarbonization will probably accelerate demand for trading in vehicles to buy an EV. USS expects that these trends will have a positive effect on its used car auction business.
2-2) Strategic actions for combating climate change
・A stronger framework for sales of EVs at auctions
The number of EVs at USS actions is certain to increase. USS is conducting R&D activities for determining EV evaluation standards, establishing an EV inspection system and other purposes. USS is also enlarging sections of auction sites exclusively for EVs and taking other actions to increase the number of these vehicles at auctions. EV activities also include the installation of EV charging facilities.
・More use of digital auction consignment forms at auctions
To be prepared to handle a larger number of vehicles sold at auctions as people trade in vehicles to switch to an EV, USS uses an electronic system for entering vehicle consignment data and producing auction consignment forms that replaces the previous hand-written forms. Significantly reducing the amount of time required to enter data improves efficiency. Activities for increasing the percentage of digital vehicle consignments will continue.
・Business portfolio expansion for continuing to create schemes for fair business transactions and the recycling of resources
USS has many activities with a long-term perspective involving its business portfolio. The objectives are the growth of the recycling business and addition of business operations related to used car auctions for the creation of one or more new core businesses in addition to auctions. One step is the growth of the industrial equipment plant demolition and removal business of SMART Inc. in order to help establish a society where resources are recycled and reused. There are also activities for starting new businesses. One example is the utilization of big data at USS concerning vehicles sent to auctions and the sale of these vehicles. USS is also considering an automobile loan business that uses financial technologies and other businesses related to used car auctions. There will be many initiatives for launching and expanding new businesses as USS continues to take on the challenge of expanding to more business domains.
（Assumptions for these activities） The following reference data were used.
- IEA Global EV Outlook 2022
(https://www.iea.org/reports/global-ev-outlook-2022)
Global EV Data Explorer
https://www.iea.org/articles/global-ev-data-explorer - For the 1.5˚C temperature increase scenario, calculations use the IEA NZE (net zero emission) scenario for determining the share of EV sales based on the premise that the total number of vehicles sold is the same as in IEA STEPS (Stated Policies Scenario).
- Figures for future years other than 2025 and 2030 are calculated using the assumption that changes will occur evenly across all years.
Third-party Assurance
Independent Assurance Report
To enhance the reliability of the ESG data disclosed, CO2 Emissions data have obtained third-party assurance.
Other Data on Climate Change
CO2 Emissions throughout the Value Chain
| Classification | Scope of calculation | CO2 emissions（t-CO2) | |||||
|---|---|---|---|---|---|---|---|
| FY2020 | FY2021 | FY2022 | |||||
| Emissions of the USS Group's business sites |
Direct emissions (Scope 1) |
Use of fossil fuels | 4,500 | 4,138 | 3,966 | ||
| Indirect emissions (Scope 2) *Market-based |
Purchased electricity and heat use | 12,338 | 12,597 | 11,737 | |||
| Total of Scopes 1 and 2 | 16,838 | 16,735 | 15,703 | ||||
| Upstream and Downstream emissions |
Other indirect emissions (Scope 3) |
Category | 1 | Resource extraction, manufacturing and transportation related to purchased goods/services | 59,257 | 68,565 | 73,520 |
| 2 | Manufacturing and transportation of capital goods such as purchased equipment | 13,782 | 17,654 | 13,502 | |||
| 3 | Resource extraction, manufacturing and transportation related to purchased fuels/energy | 2,861 | 2,727 | 2,562 | |||
| 4 | Upstream transportation and distribution | 8,863 | 6,248 | 6,648 | |||
| 5 | Disposal of wastes discharged from business sites | 2,122 | 3,149 | 5,515 | |||
| 6 | Employee business travels | 147 | 166 | 146 | |||
| 7 | Employee commuting | 1,866 | 1,605 | 1,722 | |||
| 8 | Operation of assets leased to the USS Group | Not applicable | Not applicable | Not applicable | |||
| 9 | Downstream transportation and distribution | 3,752 | 2,838 | 3,531 | |||
| 10 | Processing of intermediate products | Not applicable | Not applicable | Not applicable | |||
| 11 | Use of sold products | 144,129 | 149,778 | 154,731 | |||
| 12 | End-of-life treatment of sold products | 2,051 | 1,609 | 1,370 | |||
| 13 | Operation of assets leased to other entities | Not applicable | Not applicable | Not applicable | |||
| 14 | Operation of franchises | 2,315 | 2,030 | 2,101 | |||
| 15 | Investments | Not applicable | Not applicable | Not applicable | |||
| Total of Scope 3 | 241,146 | 256,369 | 265,347 | ||||
| Total of Scopes 1, 2, and 3 | 257,984 | 273,104 | 281,050 | ||||
*1. CO2 emissions refers to emissions from all USS Group sites (100%).
*2. Totals shown may differ from the simple sum of values shown due to rounding.
*3. CO2 emissions shown as "not applicable" correspond to zero.
Energy Usage
Boundary: All USS Group sites (100%).
| Energy | Unit | FY2020 | FY2021 | FY2022 |
|---|---|---|---|---|
| Gasoline | kl | 582 | 585 | 564 |
| Diesel Oil | kl | 743 | 617 | 572 |
| Kerosene | kl | 107 | 79 | 80 |
| LP Gas | t | 260 | 268 | 262 |
| Natural Gas | Thousand Nm3 | 82 | 84 | 89 |
| Electricity(Non-renewable energy) | MWh | 28,837 | 27,560 | 25,587 |
| Electricity(Renewable energy) | MWh | - | - | 1,445 |
| Total | MWh | 48,001 | 45,278 | 44,056 |
Evaluation of Energy Reduction Activities External Organizations
For the fifth consecutive year, starting in FY3/2017, USS was classified as an outstanding energy conservation company (class S) under the business classification system for energy conservation measures. The Japanese Ministry of Economy, Trade and Industry assigns one of four classes (S, A, B, C) to all companies that submit periodic reports prescribed by the Energy Conservation Act. We will continue to use a broad range of energy conservation activities in order to retain our S rating. *URL for more information about this evaluation system https://www.enecho.meti.go.jp/en/