We strive to further reduce the environmental impact of our operations, focusing on the most significant environmental risks and opportunities for our business and stakeholders. These currently include climate change, the sustainable use of resources, and responsible waste management.
Environment and our operations
Tackling climate change
Climate change is the biggest environmental challenge facing society and our business. The effects of climate change, such as global warming and changing weather patterns, could have serious implications for our supply chain - given that our products are mainly agriculture-based - and also for our own operations.
We are committed to tackling this issue and we are reducing Greenhouse Gas (GHG) emissions across our entire value chain to support global action on global climate change, with the longer-term aim of achieving Net-Zero GHG emissions from our operations.
The JT Group supports the Paris Agreement to limit global warming to well below 2 degrees Celsius. Our statement on the Paris Agreement can be found here.
Task Force on Climate-related Financial Disclosures (TCFD)
The potential for financial impact associated with climate change is now well known, and concern is growing about its mid- to long-term impact on business operations and financial market stability. We officially endorsed the recommendations of The Task Force on Climate-related Financial Disclosures (TCFD) in December 2020.
A key aspect of the TCFD recommendations relates to the identification, assessment and management of climate-related risks and their integration into overall risk management. With this in mind, we conducted climate scenario analysis. Our analysis was based on several scenarios: a global temperature increase of 1.5℃, 2℃ and 4℃. This approach is in line with the expectations of the TCFD.
Six main risk factors were selected for analysis. As the outcome we identified two main climate-related risks: “potential cost increases due to governments raising carbon taxes to further reduce Greenhouse Gas (GHG) emissions” and “the impact on leaf tobacco growing due to changes in environmental conditions”.
Governance
Climate-related issues are of strategic importance to our business. Through our business-wide enterprise risk management process, we have identified climate-related risk as one of our enterprise-level risks for our tobacco business, which also needs to be considered in local risk inventories and assessment processes. Board oversight is critical and climate-related issues, especially those that may have impacts on business strategy, are brought up in quarterly Board-level meetings.
Our corporate governance system can be found here.
Strategy
Through climate scenario analysis, we identified two main risks: “potential cost increases due to governments raising carbon taxes to further reduce GHG emissions” and “the impact on leaf tobacco growing due to changes in environmental conditions”. Our plan is to mitigate these risks by continuing to implement climate-related initiatives across our value chain and address areas for improvement.
See the JT website for general information on environmental initiatives.
Risk Management
We consider climate-related risks and identify risk mitigation and management approaches through our Enterprise Risk Management (ERM) process. We also include these risks in local risk inventories, assessment processes, and action plans, which are partly based on our ongoing country-level climate scenario analysis. We will compare business-wide risks from local assessments and identify the most critical ones.
Metrics and Targets
We have set a target to reduce GHG emissions from our own operations by 47% (2030 versus 2019). We have also set a longer-term GHG emissions reduction target, as well as targets for renewable electricity, backed by our Group-wide climate scenario analysis.
Read more on Environment, Environmental data / External verification and Data calculation, consolidation methods.
Details of Climate Scenario Analysis
We reviewed various risk factors with the potential to have a substantive financial or strategic impact on our business. This process identified two main risks:
- Potential cost increases due to the raising of carbon taxes by governments to further reduce GHG emissions
- The impact on leaf tobacco growing due to changes in environmental conditions
Our conclusion was that we could mitigate both risks by continuing to implement climate-related initiatives and programs across our value chain. This would mean that our business operations would not be materially disrupted by financial impacts.
Transitional Risks
| Category | Risk name | Parameter | Time horizon | Magnitude of impact |
|---|---|---|---|---|
| Policy | Emerging regulation Carbon pricing |
Carbon tax | Long-term | Medium-low |
-
Explanation of impact / Impact (100 million yen) /Description of responses
Explanation of impact
Increases in carbon tax may increase procurement cost of tobacco leaf and other materials and services. It may also lead to additional company expenditure due to tax increase for the Group’s direct operations. If a carbon tax is imposed on raw or secondary materials, or services used in each phase of the agricultural value chain (e.g. agricultural chemicals, agricultural machinery, processing machinery, storage and distribution), in that case, the JT Group might bear the additional cost and/or transfer this to the raw material price.
Impact (100 million yen)
7~150
Description of responses
- Reducing our energy consumption through capital investment
- Energy saving and renewable energy programs
- Introducing green vehicles and engaging with suppliers to understand their climate-related risks
Physical Risks
| Category | Risk name | Parameter | Time horizon | Magnitude of impact |
|---|---|---|---|---|
| Chronic | Change in growing environment of tobacco leaf | Change in yield of tobacco leaves by climate change | Long-term | Medium |
-
Explanation of impact / Impact (100 million yen) /Description of responses
Explanation of impact
Changes in environmental conditions for leaf growing, including CO2 levels in the atmosphere, shifts in the prevalence and presence of tobacco crop pests and diseases related to climate change, generally higher-than-average temperatures and precipitation patterns, together with water scarcity, could impact the availability and quality of key natural resources for the JT Group, including tobacco leaf. This could occur in one or more of our tobacco sourcing countries. As a result, the cost of sourcing tobacco leaf could increase.
Impact (100 million yen)
80~370
Description of responses
- Shifting leaf growing regions based on identified climate-related impacts
- Implementing climate change adaptation measures
- Smart agriculture and breeding
- Improving yield in growing regions
Country-based Climate Scenario Analysis
To further understand climate-related issues and potential risks at a more granular level, we have carried out a program of country-level climate scenario analysis in our tobacco business.
In the initial phase, from 2020 to 2022, we completed climate scenario analyses for eleven countries . We prioritized countries where we have a combination of leaf sourcing, manufacturing and markets. We used consistent risk modelling and global warming scenarios across all three years.
We assessed potential exposure and vulnerability to climate-related issues for leaf sourcing, processing, manufacturing and markets, using the following indicators: river flooding, sea level rise, heat stress, rainfall variability, water stress, drought, hurricanes, extreme rainfall and frost. We assessed potential exposure using climate modelling based on scientific research and literature, and assessed vulnerability through interviews with local employees. For our analysis we used three warming projections called Representative Concentration Pathways: RCP2.6, RCP4.5 and RCP8.5.
Emissions reduction/ Renewable energy
We are expanding our sustainability ambitions across the entire value chain and accelerating our efforts to reduce GHG emissions. To date, this has been through a combination of energy and emissions reduction initiatives, increasing the proportion of the energy we use that comes from renewable sources and production impacts. Going forward, the main programs to achieve the target relate to further improvements in energy efficiency, renewable energy, and vehicle fuel type and efficiency.
As part of our efforts to meet our energy and emissions target, we will increase the proportion of renewable electricity that we use to 50% by 2030, in support of our goal of reaching 100% by 2050. In our tobacco business, 50% 2025 and 100% by 2040.
In our direct operations, the renewable electricity target will be achieved through on-site generation and the sourcing of third-party renewable energy.
We are continually working to identify renewable energy opportunities. Where possible, and where it makes business sense, we have invested in renewable energy generation opportunities and will continue to invest in opportunities that increase our use of renewable resources. Renewable energy opportunities are included in our business planning and in our feasibility study for achieving Carbon Neutrality in own operations by 2030 and Net-Zero GHG emissions across the entire value chain by 2050. In a drive to accelerate the reduction in our GHG emissions, we are taking advantage of zero- or low-carbon energy tariffs and green energy certificates, and we have entered into a power purchase agreement for renewable energy. See our road map to achieving Net-Zero GHG emissions.
Progress toward quantitative target
By the end of 2022, 31% of the electricity used in our tobacco business came from renewable sources (either purchased or generated on-site), and 24% of the electricity we used in the JT Group in 2022 came from renewable sources. Moving forward, we have plans in place which will further increase the proportion of renewable electricity we use.
Through our Environment Opportunities Scheme, our factories have identified 269 projects between 2015 and 2022. These avoid over 7,000 tons of GHG emissions and represent a cost saving of over US$2 million, with an average payback of three months.
Vehicle emissions are another important consideration for us, and we encourage all of our locations to select alternative, more environmentally friendly fleet vehicles and change the way in which travel is planned, improve the style of employees’ driving and commuting etc. Within our tobacco business, we have launched our Green Mobility Program, designed to reduce emissions associated with our fleet.
Greenhouse Gas emissions in our supply chain
As part of the JT Group Sustainability Targets, we are committed to reducing Greenhouse Gas (GHG) emissions associated with our supply chain. We recently updated our absolute Scope 3 GHG emissions target: to reduce our GHG emissions associated with purchased goods and services by 28% between 2019 and 2030 and to achieve Net-Zero GHG emissions for our entire value chain by 2050.
In Japan, we have a long-standing relationship with tobacco growers, which brings benefits to our suppliers, our business, and our planet. Working closely with leaf growers and our machinery supplier, we have developed an innovative drying machine which improves fuel efficiency in the tobacco curing process - reducing both the use of non-renewables and GHG emissions. In addition, the new machines help growers to save costs and improve quality, directly impacting our business and improving the environmental impact associated with our tobacco value chain. By the end of 2022, our leaf growers were using a total of 828 of these drying machines across Japan. We plan to expand the program by implementing a new curing system to make the process even more sustainable.
We continue focusing our efforts on improving curing efficiency, through barn furnace upgrades and new heat exchange designs. These not only optimize tobacco leaf quality, but also reduce wood fuel consumption. In addition, we are addressing the production of wood resources required for tobacco curing through dedicated agroforestry programs and tree-growing initiatives in Tanzania and Zambia, for instance.
Please see other detailed efforts on JT International sustainability website.
Progress toward quantitative target
In 2022 GHG emissions related to purchased goods and services decreased by 11% comparing to 2019. This is driven mainly by lower emissions associated with tobacco leaf and non tobacco materials. This is the result of initiatives including curing efficiency improvement, renewable wood production and packaging weight reduction.
Science Based Targets
Greenhouse Gas (GHG) emissions reduction targets for 2030 from our operations have been validated by the Science Based Targets Initiative (SBTi) as being in line with the 1.5℃ global warming scenario.
Protecting water
In the JT Group Sustainability Targets, we commit to supporting global water stewardship by reducing our water use and encouraging water risk management in our supply chain. We have set a target to reduce our tobacco business-associated water withdrawal by 33% by 2030.
Societal demand for water is increasing globally and water-related issues such as availability, quality, flooding, drought, or regulatory changes can have a major impact on society and our business.
Our tobacco and food manufacturing activities all use water. However, for our main operation, the tobacco business, the water that is required for tobacco crops comes predominantly from rainfall, while tobacco processing and manufacturing are not water-intensive.
As part of our approach to good water stewardship, we committed to carrying out water risk assessments at 100% of our factories. In 2020, we completed the first risk assessments at all of our factories, and we are now working on our program of reassessments. Our water risk assessments consider water availability and quality, changing legislation, natural disasters such as flood and drought, and future water stress. From the assessments, we develop action plans to reduce risk and improve overall water management and security. We have been recognized by CDP as an A List company, the leadership level for Water Security in 2023.
We will continually support global water stewardship by reducing our water withdrawal and by encouraging water risk management in our supply chain.
Please see other detailed efforts for water stewardship on JT International sustainability website.
Progress toward quantitative target
Based on 2022 results, we successfully achieved our water withdrawal target ahead of our schedule. The Original target was set for 2023. From 2015 to 2022, we reduced the water withdrawal associated with our tobacco business by 23% - well ahead of our target of 15% by 2030. We achieved this by implementing water efficiency improvement programs. We have set even more ambitious goals in the JT Group Sustainability Targets.
Biodiversity
Responsible management of biodiversity is important for the JT Group. Our focus is on conservation of biodiversity during tobacco growing, where our biggest impact is. One of the JT Group Principles in Leaf Tobacco Production is to reduce environmental impact and ensure efficient use of natural resources while striving to conserve biodiversity. Biodiversity is also included as a focus area in the Leaf Sustainability Framework. We endorsed the Declaration of Biodiversity by Keidanren, which is an ambitious action guideline that summarizes specific biodiversity-related activities in Japan.
Please see the JT Group Biodiversity Statement for more of our commitment and ambitions.
Biodiversity risk assessment
In 2022, we have conducted an initial risk assessment of our impact and dependency on biodiversity for our tobacco business, with reference to TNFD v0.3 and the International Union for Conservation of Nature 2021 (IUCN 2021)’s guidelines. The scope of the assessment covers our own operations, upstream activities, and downstream activities.
When carrying out the impact assessment, we firstly broke down our business activities to raw material sourcing, manufacturing, and disposal and evaluated the impact of each activity. On top of that, since biodiversity is closely related to locations and specific countries’ natural resources, we analyzed our main countries with operational activities with scope and severity and calculated the qualitative impact score accordingly. This has helped us to identify the top geographical locations where we possibly have the highest impact. During the assessment, we referred to data from ENCORE*, National Biodiversity Index (NBI), and Environmental Performance Index (EPI).
Regarding dependency, we have used the same methodology as we assessed our impact and have identified the areas and geographical locations with the highest level of dependency.
Through the impact and dependency analysis, we have identified that we do have risks of biodiversity. Possible impacts on terrestrial ecosystem use, water pollutants and soil pollutants were identified in the tobacco supply chain. Regarding dependency, the prevention of flood and storm, land stabilization, water supply are possible areas with high dependency on ecosystem services.
Looking ahead, we will further carry out both qualitative and quantitative risk assessment covering the whole group step by step, with the aim to define our main focus areas, objectives, plans and targets to address the issues. Our phase 2 risk assessment covering the whole group is to be completed in September, 2023.
*Natural Capital Finance Alliance (Global Canopy, UNEP FI, and UNEP-WCMC) (2022). ENCORE: Exploring Natural Capital Opportunities, Risks and Exposure. [On-line], [December, 2022], Cambridge, UK: the Natural Capital Finance Alliance. Available at: https://encore.naturalcapital.finance. DOI: https://doi.org/10.34892/dz3x-y059.
Biodiversity conservation actions
When moving forward with our actions based on the risk assessment, we are embracing Science-Based Targets for Nature（SBTN） guidance on the mitigation hierarchy following the AR3T framework. The following initiatives are the examples of our approaches:
Avoid
We are working to replace Highly Hazardous Pesticides (HHPs) with safer and more environmentally friendly options across the company.
In January 2022, we updated our internal standards for Crop Protection Agent (CPA) residue. The HHP limits are now applied to all processed tobacco from crops transplanted in 2022. If, through our analysis, we detect that the residue level of HHP Criterion 1 pesticides exceeds the LoQ, we do not purchase the tobacco. We formally communicated this to all our tobacco suppliers in February 2021.
In addition, we made it clear to our suppliers that we expect them to avoid environmental contamination and, also importantly, to protect people and animals from exposure to hazardous CPAs. We stressed that using less hazardous CPAs is as critical as wearing the correct personal protective equipment.
Reduce
In 2022 we introduced a new sustainability governance model with a focus on product stewardship, circularity and waste. It aims to manage the safety and the environmental and social impacts of our products and their packaging at all stages of their life cycle - and to avoid waste through product circularity or reduce it by operating an effective waste management system.
We will reduce the environmental impact of our products and packaging through:
- Design solutions
- Facilitating responsible collection and disposal
- Consumer awareness and education
More specifically, we will reduce our packaging (including plastic) and ensure that the remaining is 88% reusable or recyclable by 2025, rising to 100% by 2030. In total, recycled content will account for 20% of our tobacco business packaging by 2025.
Regenerate
In Zambia, we are taking proactive approaches to of biodiversity regeneration and forest conservation. The Shishamba Forest Livelihoods Project in Zambia is an initiative for the sustainable management of Miombo woodland. It includes, among other things, the promotion of woodland conservation practices such as fire management and assisted natural regeneration. Local communities are empowered to use and manage forest resources responsibly and sustainably.
Restore
We are partnering with the Wildlife Research and Environmental Education Society and the National Bank for Socio-Economic Development to restore over 300 hectares of permanent-protection areas in Brazil with the participation of our contracted growers. This area includes parts of a National Nature Reserve as well as land owned by tobacco growers.
The restoration work started in 2018, when we replaced 35 hectares of pine trees in the Pirai do Sul National Forest with native species to help restore the natural landscape. We also trained 33 local college students in ecological restoration.
More than 195 hectares have been restored on 200 small farms in Permanent Preservation Areas, by planting some 140,000 seedlings of native species and installing 200,000 meters of fences to protect them. Only six hectares remain to meet our restoration target.
We are also restoring 75 hectares of the Meia Lua Natural Reserve, in the municipality of Ponta Grossa. The Project was audited and approved by funding partner, the National Bank of Socio-economic Development (BNDES), in November 2022 and is scheduled to be completed in May 2023.
Transform
We have formed partnership with the LIFE Institute, an international non-profit standard-setting organization, since 2017 to measure and improve our impacts on biodiversity.
The LIFE Methodology for Business and Biodiversity has helped our tobacco leaf business in Brazil to enhance its sustainability performance and deepen its understanding of and commitment to biodiversity. An important benefit of the partnership with LIFE is reflected in information management: organization and standardization of environmental data allows investment decisions to be based on evidence, so that investments bring greater environmental benefits and lower risks to the company.
Our partnership with the LIFE Institute, together with other companies, led to the launch of LIFE Coalition for Business and Biodiversity : a group of leading companies which share the ambition of scaling up biodiversity conservation at a global level through LIFE solutions. This group provides a great opportunity to exchange best practice experiences to mitigate impacts related to the methodology's indicators: carbon footprint, water use, waste generation, land use, and energy use, all leading to biodiversity conservation.
Read more on Supply Chain and see other detailed efforts for biodiversity on JT International sustainability website.
Each of the JT Group business will perform assessment to evaluate impact on its dependency on the ecosystem, including biodiversity aspects as set in the JT Group Sustainability Targets. Assessments for the tobacco business will be performed by 2024 and by 2025 for the pharmaceuticals and processed foods businesses.
Forestry
Ensuring a sustainable wood supply and contributing to conserving and rehabilitating forests are key objectives set out in the JT Group Sustainability Targets. One of our targets is to achieve Zero net deforestation of managed natural forests in the entire tobacco business supply chain by 2030. Our focus is to establish and monitor woodlots with higher productivity and usability, securing a sufficient, renewable supply of wood for tobacco production while also reducing wood consumption through improved curing efficiency. Due to the importance of forestry conservation for our business and the whole society, we are currently reviewing our environment plan to update our targets.
Progress toward quantitative target
Improvements in tree planting and wood production
Based on our 2022 tree planting activities in Tanzania, Zambia, and Brazil, we estimate 98% renewable wood supply in crop year (CY) 2029, based on actual tree planting captured with Agroforestry App in CY2022 (Nov 2021 – Feb 2022).
Improvements in tree seedling production
An improved adoption of our Minimum Forestry Standards (MFS) has already shown results in enhanced tree seedling quality and uniformity. Quality tree seedlings are the basis for a successful woodlot establishment and optimized tree growth potential.
Please see other detailed efforts for forestry on JT International sustainability website.
Waste Reduction
From a societal and stakeholder perspective, waste, and particularly plastic waste, is of increasing concern. From a business perspective, all waste has a direct cost (handling and disposal) and an indirect cost (e.g. resource and processing costs).
We consider waste impacts on each stage of our operations from receiving materials and services to post-consumer waste of our product and packaging. That’s why waste management is a key component of the JT Group Sustainability Targets. Across the JT Group we apply a “reduce, reuse, recycle” approach. We have also set targets for waste reduction as reducing waste helps to conserve resources, which in turn helps to minimize our environmental impact and cut business costs.
Progress toward quantitative target
Based on 2022 results, we have reduced waste associated with our tobacco business by 22% since 2015. We successfully achieved our waste reduction target ahead of our schedule. The Original target was set for 2023. This was driven predominantly by waste reduction initiatives (e.g. production yield improvement) and waste reuse programs (e.g. tobacco cases reused).
We will aim to further reduce our environmental impact by realizing the targets set in the JT Group Sustainability Targets, which focus on resource recycling.
Read more on Product stewardship, circularity and waste.
Designing for circularity - Packaging, product and device
The JT Group has set a target to reduce its packaging (including plastic) and ensure that the remaining is 88% reusable or recyclable by 2025, rising to 100% by 2030.
Please see other detailed efforts on JT International sustainability website.
Sustainable agriculture
As set in the JT Group Sustainability Targets, JT Group's direct contract leaf tobacco farmers will eliminate the use of HHPs (High Hazardous Pesticides) classified as Class 1 by 2024, and all HHPs by 2040. By 2030, 100% of our directly-contracted growers will have adopted our Good Agricultural Practices (GAP) Protocol.
For more information, please visit JT International sustainability website.
Case studies
Sustainability is deeply embedded within our operations. We work hard to minimize our environmental impact by focusing on energy efficiency, Greenhouse Gas (GHG) emissions reduction, water efficiency, and waste reduction. Many programs and initiatives are already in place, both globally and locally. These include everything from the way we source raw materials to the way we ship finished products. Read more about our local and global activities:
In our Japanese business operations (Japanese website)
In our tobacco business