To verify the strategic resilience of our business, we initially analyzed their impacts of climate change risks and conducted a scenario analysis based on the result of the impact analysis.In the course of the impact analysis, we listed every possible impact on our business from climate change or measures against climate change, and then identified the risks and opportunities brought by such impacts in each of our core businesses. The following table lists risks and opportunities by business, and integrated results of the different impacts of climate change (Table 1).

Table 1 Extracted Risks and Opportunities

Risks Opportunities
Acceleration of carbon pricing - Energy procurement costs increase.
- Competition from low-carbon businesses intensifies toward carbon neutrality.
- Energy procurement costs stabilize because of increased demand for renewable energy.
- Businesses related to fuel cells, energysaving products, solution services, and energy management expand.
Accelerated shift to electric vehicles - As more firms enter the automotive business, competition intensifies.
- Increased demand for automotive batteries intensifies material procurement competition.
- Higher cost of automotive batteries production reduces car business profitability and pressurize costs of components.
- Electric vehicle-related markets expand.
Increased environmental awareness among consumers - Insufficient environmental efforts and promotion lead to unsupported by consumers..
- Value shift from purchasing to leasing decreases sales.
- Recognition as a sustainable company and of sustainable products attracts more customers.
- Businesses related to low-carbon products, eco materials, and energy management expand.
Increased risk to reputation - Insufficient efforts in decarbonization reduce business opportunities. - Recognition of environmental technologies and products increases business opportunities.
Expansion of renewable energy usage - Investment in facilities with renewable energy increases. - Highly efficient solar cells open new markets.
Expansion of carbonfree power generation - Production energy procurement costs increase.
- Regional disparity of carbon-free power generation lead to review the strategies of production sites.
- CO2 emissions reduction throughout product lifecycles encourages shift to electric vehicles leading to related market expansion.
Spread of ZEH/ZEB - Low-carbon products in housing equipment become mere commodities. - Increased opportunities to provide energy management & total solution services through housing equipment and home appliances.
- Demand for heat insulation materials increases.
Replacement with lowcarbon products - Increases development costs of lightweight and robust materials for competitive lowcarbon products. - Increases demand for materials that contribute to reduction of energy consumption.
Streamlining of supply chain - Expanded capital investment puts stress on balance sheet. - Demand for energy management systems increase.
- Lowered prices from reduced production costs increase sales.
Conversion to a circular economy - Delay in recycling and reuse technologies increases costs.
- Resource recycling does not suit consumers'tastes.
- Business models change to circular economybased models.
- Demand for recycled resources increases.
Constant temperature rise - Poor health of employees reduces productivity.
- High energy consumption from excess usage of air conditioners puts off consumers.
- Businesses related to healthcare, air conditioning and ventilation, energy management, housing, and cold chain expand.
Physical risk management related to climate change - Suspension of operations at our factories.
- Negative impact on supply chain.
- Demand for needs of resilient infrastructure increases.
- Fuel cell business with resilience expands.
- Disaster-resilient manufacturing by managing risks with BCPs.

The following figure shows the impact analysis results of climate change risks (Figure 1) regarding the results of analyzed factors based on the identified risks and opportunities and analyzed impact on our businesses.

Figure 1 Impact Analysis of Climate Change Risks

As a result of analyzing the impact of climate change risk on our business, the categories that were classified as "very strong" were "conversion to a circular economy," "progress of electric vehicle shift," and " promotion of ZEH / ZEB." "Progress of electric vehicle shift" and "promotion of ZEH / ZEB" are combined as "promotion of clean energy". The categories between "very strong" and "strong" are "acceleration of carbon pricing," "expansion of renewable energy use," "replacement with low-carbon products," "improvement of supply chain efficiency," and "increasing consumer awareness of the environment", "increased reputation risk," and "physical risk management for extreme weather." "Strong" were classified as "expansion of non-CO2 emission power generation" and "chronic temperature rise".

Regarding factors that have an extremely high impact on our business from the climate change viewpoint, we extracted "spread of clean energy" and "conversion to a circular economy." Setting these two factors as the axes of a matrix, we created four scenarios toward 2030 over the quadrants as shown below (Figure 2). We defined a society in which clean energy is in wide use and the shift to a circular economy is progressing as the 1.5°C scenario, and a society that does not shift to a circular economy and relies on fossil fuel as the 4°C scenario.

Figure 2 Four Scenarios

With "clean energy becoming widespread" as the horizontal axis and "the transition to the circular economy (CE) progressing" as the vertical axis, we formulated social scenarios for each of the four quadrants. We envisioned a society in which clean energy is widespread and the transition to a circular economy is progressing as a "1.5 ° C scenario." It is a society where clean energy and CE serve as social foundations, and achieving a temperature rise of 1.5 ° C is a common recognition, and it is a society that realizes sustainability. We are positioning it as a "decarbonized recycling society". There are three opportunities in this society: clean energy regulation and technological innovation accelerate decarbonization, clean energy infrastructure is improved, and CE regulation and technological innovation shift to a business model that assumes long-term use of goods.  On the other hand, there are three risks for this society: loss of opportunity due to delays in responding to clean energy + CE society, commoditization of energy systems in general, and competition for recycled materials. In the society where clean energy is widespread and the conversion to the circular economy is not progressing, the trend of mass consumption remains and resource depletion is predicted, and the cost is high, but clean energy is the basis. It is a society and is positioned as a "low-carbon mass consumption society." Opportunities in this society include accelerated decarbonization due to clean energy regulations and technological innovation, and development of clean energy infrastructure. Risks include opportunity loss due to delays in responding to a clean energy society, and commoditization of energy systems in general. A society in which clean energy is not widespread and the transition to a circular economy is progressing is a society in which the conversion to CE has been achieved and the business model has shifted to a business model that assumes long-term use of goods, even though the infrastructure development of clean energy is delayed. We are positioning it as a "Fossil-dependent recycling society". The opportunity in this society is the shift to a business model (distribution solution, material) that assumes long-term use of goods due to CE regulations and technological innovation. The risk includes opportunity loss due to delay in responding to CE society, and competitions for acquisition of recycled materials. We envisioned a "4 ° C scenario" in which clean energy is not widespread and the transition to a circular economy is not progressing. It is a society in which natural disasters become chronic due to temperature rise and lifelines are desired to be stabilized, and we position it as an "entropy-increasing society. "There are two opportunities in this society: stabilizing lifelines, increasing value related to health, increasing food-related factories and distribution, and improving efficiency. There are two risks: opportunity loss due to delay in responding to lifeline stabilization, equipment / human damage, and energy acquisition competition.

The society named as (A) Decarbonized Circular Society is equivalent to the 1.5°C world. If scenario (A) lacks a circular economy, the society becomes (B) Low-Carbon Society with Mass Consumption. If scenario (A) lacks clean energy, the society becomes (C) Fossil Fuel-Dependent Circular Society. Scenario (D) Larger Entropy Society is equivalent to the 4°C world. 

Fuller descriptions of each society are given below.

A Decarbonized Circular Society

●Impact on industries
Concurrent progress of legislation and technological innovation related to clean energy and the circular economy help form a related infrastructure. This encourages investment in decarbonization in the automotive and housing industries, and advances the shift to business models that assume long-term use of goods in industries involved in the supply chain. It is also expected that not only products but also the construction of sustainable towns that utilize clean energy and a circular economy will attract investment.

●Changes in customer value
Consumers: Eco-consciousness, cost reduction, ethical, on-demand usage, etc.
Corporations: Eco-consciousness, cost reduction (energy saving, asset-light approach, better fuel efficiency, etc.), effect and efficiency enhancement (maximization of customer value, i.e. better experience value, etc.).

B Low-Carbon Society with Mass Consumption

●Impact on industries
Progress in carbon-related legislation (NEV/ZEV laws and ZEH/ZEB subsidy policies, etc.) and technological innovation (cost reduction of renewable energy and accumulator batteries, etc.) encourages standardization related to decarbonization in the automotive and real estate industries, as well as attracting investment. This helps the shift to electrification and a clean energy infrastructure. Adoption of clean energy (renewable energy, hydrogen, etc.) also expands.

●Changes in customer value
Consumers: Eco-consciousness, cost reduction (energy saving, better fuel efficiency, etc.).
Corporations: Eco-consciousness, energy saving and better fuel efficiency (downsizing, weight reduction, high density and capacity, high efficiency, etc.).

C Fossil Fuel-Dependent Circular Society

●Impact on industries
Progress in technological innovation of waste plastic and for a circular economy (data linkage, material recycling, etc.) and their related legislation eliminate waste in the supply chain and encourage a shift to a circular economy. Corporations involved in the supply chain (manufacturers, distributors, etc.) change their business models from sales and consumption-based models to those that assume long-term usage of goods, including leasing, sharing, and repair. Products made of recycled resources become mainstream backed up by the formation of waste collection networks and material recycling systems.

●Changes in customer value
Consumers: Eco-consciousness, ethical, on-demand usage, etc. Corporations: Effect and efficiency enhancement (maximization of customer value, i.e. better experience value, etc.), cost reduction (energy saving, asset-light approach, etc.).

D Larger Entropy Society

●Impact on industries
Changes in rainfall amounts and patterns make it difficult to control the yield and quality of agricultural products. This encourages a shift to demand and supply matching consumption, which eliminates waste in distribution. Deterioration of living and working environment and increases in illness due to constant temperature rises expand demand for companies related to indoor environments and health (building, home appliances, healthcare, etc.). In response to the increase in natural disasters, investment in infrastructure resilience to maintain the supply chain will increase.

●Changes in customer value
Consumers: Lifeline stabilization and resilience enhancement, health.
Corporations: Productivity enhancement, demand and supply matching, supply chain resilience.

We can address the risks and opportunities corresponding to the above scenarios through any of our nine main businesses shown below.

  1. Home appliance business
  2. Air quality and air conditioning business
  3. Food distribution business
  4. Smart Energy System business
  5. Electrical facility materials business
  6. Frontline process innovation business
  7. Automotive device business
  8. Automotive battery business
  9. System device business

We have formulated strategies for each of the nine businesses from the climate change viewpoint. Some of the strategies are listed below, indicated with the corresponding scenario A to D.

1. Home appliance business

1) Attain energy conservation performance in our products that surpass those of competitors, and offer energy saving value in customers’ daily lives by utilizing IoT/AI.

A
B

2) Increase usage of recycled materials and employ recycling-oriented manufacturing.

A
C

2. Air quality and air conditioning business

1) Create safe and secure, clean and comfortable spaces with our exclusive clean technologies in homes, shops, workplaces, transportation, public areas, and many other locations.

A
B
C
D

3. Food distribution business

1) Promote energy conservation offering comprehensive support for our energy monitoring system, which covers system installation to operations and maintenance. The equipment refurbishing service prolongs the system’s usage, while contributing to material recycling.

A
B
C

4. Smart Energy System business

1) Demonstrate energy management through practical and full usage of hydrogen energy and roll out the RE100 solution business.

A
B
D

5. Electrical facility materials business

1) Reduce energy consumption by producing more energy-efficient equipment and installing energy management systems in houses and buildings.

A
B
C
D

6. Frontline process innovation business

1) Reduce waste energy and waste goods by supply chain orchestration, such as streamlining corporate customers’ logistics and responsive tuning of demand and supply.

A
B

2) Offer solutions to improve energy efficiency and automation at corporate customers.

A
B

7. Automotive device business

1) Expand assortment of products that contribute to electrification and weight reduction of vehicles.

A
B
C
D

2) Expand the number of products made from recycled resin materials.

A
C

8. Automotive battery business

1) Encourage shift to electric vehicles through further performance enhancement, cost reduction, and production expansion.

A
B
C

2) Reduce energy usage in material procurement, by reducing or making usage of rare metals zero (e.g. cobalt) and promoting recycling of battery materials.

A
B
C

9. System device business

1) Provide devices and modules that contribute to electrification and enhanced power usage efficiency of vehicles.

A
B

2) Contribute to peak shaving of data centers etc. by strengthening our skills to offer the optimum power storage systems.

A
B

The scenario analysis found that we could always focus on one or more of our businesses in each of the four scenarios. In other words, the analysis successfully verified the resilience of our business strategies. The analysis also helped us understand that we can contribute to building a sustainable society through our businesses. We continue our efforts to build the 1.5°C world, represented by our society (A).