SustainabilityDisclosure Based on TCFD Recommendations

TCFD

Climate change is likely to severely affect society and the economy and have a significant financial impact on the Sawai Group. Therefore, we consider responding to climate change to be a key issue the Group should address.

Our Group will strive to reduce greenhouse gas (GHG) emissions and disclose information in line with the disclosure framework provided by the TCFD*1 in order to realize a carbon-free society*2 that the Paris Agreement aims for.

In September 2021, we declared our support for the TCFD recommendations.

  • The Task Force on Climate-Related Financial Disclosures was established in December 2015 by the Financial Stability Board (FSB) at the request of the G20 to develop recommendations on the types of information that companies should disclose to support investors, lenders, and insurance underwriters in appropriately assessing and pricing climate-related risks.
  • A society realized by achieving the Paris Agreement targets of “holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels” and by attaining a good balance between GHG emissions and absorption (by forests, for example) by the second half of the 21st century.

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 COO (hereinafter, “the GCOO”) and oversees the performance of the GCOO’s duties.

The Group has established a Group Sustainability Committee, which is chaired by the GCOO and composed of representatives from Group companies. The committee meets twice 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 acts on the committee’s instructions and advice in its ongoing initiatives and improvement activities.

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 GCOO but also for deliberations to the Group Sustainability Committee and the Board of Directors, whose 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 President and Representative Director, which meets four times a year to discuss and examine sustainability-related matters.

Strategy

The Group follows its corporate philosophy “Always putting healthier lives first” 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.

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.

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.

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 intensity per unit of production volume by 25% from the FY2013 level by FY2030. We have also set a short-term target of reducing the (Scope 1 and 2) CO2 emission intensity per unit of production volume by 1% or more year-on-year every year.

Although we use a metric that shows progress in the planned introduction of renewable energy, we need further consideration before setting a target for the metric.

Risks and Opportunities Related to Climate Change

Risks

Type Risk overview Impacts on the Group’s businesses,
strategy, and financial planning
Magnitude of impacts The Group’s methods for addressing climate-related risks
1.5℃ scenario 4.0℃ scenario
Transition risks Policy and Legal Risks Introduction of carbon pricing
(a carbon tax and an emissions trading scheme) and the resulting increased burdens
  • Burden created by carbon pricing on the Group
  • Need to pass on the carbon-pricing-created financial burdens of suppliers with high GHG emissions to the Group’s purchase prices of raw materials
  • The Group’s burden of capital investment in energy saving necessary to reduce GHG emissions
Moderate Minor
  • Considering the introduction of renewable energy
  • Devising and implementing measures to enhance production efficiency, including reducing waste products
Population, economic, and geopolitical risks Price hike for bio-derived raw materials due to population growth and temperature increases
  • Population growth especially in emerging economies will cause an increase in the prices of grain and grain-based products (starch, sucrose, corn, etc.) for food and feed use and consequently in the prices of raw materials of additives for pharmaceutical products.
Minor Moderate
  • Diversifying suppliers
  • Studying alternative technologies
Physical Risks Flood risks
(acute risks)
Increased frequency of typhoons, torrential rains, floods, etc.
  • Increased risk of damage to the Group's business sites
  • Increased risk of damage to the business sites of the Group’s suppliers
Minor Major
  • Sandbagging the areas where product inventories are stored
  • Obtaining damage insurance coverage
  • Formulating BCPs for the Group and its supply chain

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.

Covered period FY2021 to FY2030
Scope of coverage Sawai Group excluding Trust Pharmatech Co., Ltd. and Upsher-Smith Laboratories, LLC
Impact classification Major: Major impacts on the Group’s businesses, strategy and financial planning that the Group estimates to be worth approximately 6.0 billion yen or more
Moderate: Moderate impacts on the Group’s businesses, strategy and financial planning that the Group estimates to be worth approximately 3.0 billion yen or more
Minor: Minor impacts on the Group’s businesses, strategy and financial planning that the Group estimates to be worth approximately less than 3.0 billion yen