EnvironmentalClimate Change

Disclosure Based on TCFD Recommendations

Governance

The Sawai Group (hereinafter, the “Group”) recognizes addressing environmental issues, including climate change, as both one of its corporate social responsibilities (CSR) and one of the important challenges it must tackle to ensure its sustainability. Accordingly, the Board of Directors has assigned the responsibility to address climate change issues to the Group Chief Sustainability Officer (GCSO) and oversees the performance of the GCSO’s duties.

The Group has established a Group Sustainability Committee, which is chaired by the GCSO and composed of representatives from Group companies. The Committee meets four times a year to discuss and examine sustainability-related matters, including climate change issues, and reports its activities to the Board of Directors, thereby making decisions on climate change issues under the direction and oversight of the Board of Directors.

The Group Sustainability Committee has a Global Environment Team, which is composed of members from Group companies, as its subordinate organization in charge of promoting specific initiatives and activities to address environmental issues, including climate change. The team reports to the Committee quarterly and constantly engages in its initiatives and improvement activities in line with the Committee’s instructions and advice.

Under the leadership of Global Environment Team members, a working group identifies and assesses climate-related risks and opportunities and implements measures to address them. The results are reported not only to the GCSO but also to the Group Sustainability Committee and the Board of Directors for deliberations so that their post-deliberation instructions and advice are followed for further improvements.

In addition, Sawai Pharmaceutical, the core company of the Group, has also established a Sustainability Committee chaired by the Chief Sustainability Officer, which meets four times a year to discuss and examine sustainability-related matters.

Following the Group Sustainability Committee’s deliberation and review in fiscal 2024 and subsequent approval from the Group Strategy Council and the Group Investment Committee, the Group has decided to introduce internal carbon pricing (ICP). From now on, we will periodically review our implementation of ICP through a similar process.

Strategy

The Group follows its corporate philosophy “Dedicated to building a healthier future for all” and the corporate philosophy of Sawai Pharmaceutical, its core company, “Always Putting Patients First” in conducting its main business of manufacturing and marketing generic drugs. We believe that it is necessary for us to address climate-related risks, which we recognize as a material issue, while keeping a good balance with our efforts to meet the fundamental requirement of ensuring a stable supply of pharmaceuticals and healthcare services, which are essential for people’s lives and health.

Meanwhile, greenhouse gas (GHG) emissions, mainly CO₂ emissions, from the Group’s business activities have been increasing in line with the Group's business expansion and the resulting growth in demand for its pharmaceutical products and healthcare services. We will work to reduce the CO₂ emission intensity in the short term and devise and implement measures to reduce total emissions in the medium to long term, including the introduction of renewable energy.

In recognition of achieving sustainability, including addressing climate change issues, as a key management issue, the Group has set a CO₂ emissions reduction target for FY2030 in its Medium-Term Business Plan (hereinafter, “the Medium-Term Plan”), which was announced in May 2021. However, we have since changed this target and established a new target for the period up to 2050.

We have also conducted scenario analysis while referring to the International Energy Agency (IEA)’s scenarios and Representative Concentration Pathway (RCP) scenarios developed by the Intergovernmental Panel on Climate Change (IPCC) in order to assess the potential impacts of climate-related risks on the Group under the following scenarios: a 1.5°C scenario that postulates that the Paris Agreement target of “holding the increase in the global average temperature to well below 2°C above pre-industrial levels” will be achieved; and a 4°C scenario that postulates that GHG emissions will continue to increase in a situation similar to the current one without major changes made to policies or regulations, leading to a considerable increase in the global average temperature.

Furthermore, we use the internal carbon price (ICP), a conversion of CO₂ emissions into a monetary value, as one of our investment decision criteria to facilitate the quantitative assessment of CO₂ emissions reduction effects and promote capital investment in CO₂ emissions reduction. The ICP is calculated and set annually based on the projected carbon price for 2050 under the IEA's Net Zero Emissions by 2025 Scenario while using the Group's weighted average cost of capital (WACC) and internal exchange rates. Investment decisions utilizing the thus calculated ICP are made primarily on capital investment projects aimed at energy conservation.

Risk Management

We examine climate-related risks and opportunities at each stage of our entire supply chain, from raw material procurement to manufacturing and marketing, and evaluate them based on the likelihood of their occurrence and the magnitude of their potential financial impacts on the Group in order to identify material risks and opportunities for the Group. This process is followed under the leadership of Global Environment Team members with the involvement and cooperation of in-house divisions and affiliated companies closely related to each stage of the supply chain. The thus screened, evaluated, and identified risks are reported to the Group Sustainability Committee and the Board of Directors, which review and deliberate on the report and make decisions on initiatives to address climate-related risks and opportunities. Those initiatives are incorporated into the annual business plan in the short term and into the Medium-Term Plan in the medium to long term according to necessity.

Furthermore, the Group has introduced and utilizes internal carbon pricing (ICP) as part of its risk management strategy, as well as in anticipation of future regulatory tightening and system reforms related to carbon taxes and emissions trading schemes.

Metrics and Targets

In setting GHG (including CO₂) emissions reduction targets, the Group uses Scope 1, Scope 2, and Scope 3 emissions as monitoring metrics and discloses the annual monitoring results for each scope on its corporate website. In the current Medium-Term Plan, we have set a target of reducing the (Scope 1 and 2) CO₂ emission on a gross volume basis by 46% from the FY2013+α level by FY2030 and net zero CO₂ emissions by 2050. We have also set a short-term target of reducing the (Scope 1 and 2) CO₂ emission at least by 1% or more year-on-year every year.

To achieve these targets, in fiscal 2025, we plan to achieve a total GHG emissions reduction of at least 10,000 t-CO₂e by introducing non-fossil energy sources worth a reduction of 6,000 t-CO₂e, as well as investing in energy-saving equipment and utilizing non-fossil certificates. For fiscal 2025, we have set the internal carbon price (ICP) per t-CO₂e at 14,500 yen.

Risks and Opportunities Related to Climate Change

Risks

Opportunities

As a result of our analysis and evaluation of climate-related opportunities that can have impacts on the Group’s operations, we have so far not identified any opportunities that can have significant impacts on the Group's businesses, strategy, and financial planning.