Disclosure based on biodiversity and TNFD recommendations
Basic approach to biodiversity
With a corporate purpose of "being an environment-creating company contributing to society through the environment by making the best use of limited resources", we contribute to the conservation of biodiversity through a variety of activities. The following issues have been put forth as the main factors behind loss of biodiversity.
- Destruction and contamination of the natural environment
- Overuse of natural resources
- Global warming
- Invasive species
Daiseki is undertaking the following initiatives for the conservation of biodiversity.
- ●Employee training on the importance of conservation of the environment and biodiversity
- ●Survey and analysis of the environmental impacts of our business activities on the areas around our business sites
- ●Reduction of the environmental impacts of wastewater from our business sites
- ●Prevention of the depletion of natural resources through promotion of the use of recycled products
- ●Prevention of global warming through reduction of greenhouse gas emissions from our business activities
- ●Prevention of pollution and conservation of the natural environment through cleanup activities around our business sites
- ●Donations to greenery conservation projects
Initiatives at each step
Overview of Daiseki's business activities that take biodiversity conservation into consideration
| The biodiversity on which our company depends | Our company's business activities | Main natural resources used by our company | Major impacts of our company's activities on biodiversity | Biodiversity conservation activities | |
|---|---|---|---|---|---|
| Activities that lead to reduction of risks | Activities that lead to expansion of opportunities | ||||
| River systems* and ecosystems in the raw material-producing areas | Procurement of wastes used as raw materials for recycled products | The main raw materials are wastes generated by the manufacturing industry | This impact is small as the use of natural resources is low | Promotion of initiatives aimed at further reductions in the use of natural resources |
|
| River systems and ecosystems where our plants are located | Production | Service water, industrial water, and ground water during plant operation |
|
|
Conservation of the ecosystem through beautification and cleanup activities around plant |
| River systems around which our consumers live Ecosystem | Use of recycled products by consumers | None | Release of harmful substances contained in recycled products into the environment | Confirmation of quality control and safety through analysis at the time of shipment of recycled products |
|
| Disposal by consumers | None | None | None | None | |
*River system: An ecosystem connected by water, such as forests, rivers, community-based forest areas, tidal flats, and beaches
Disclosure based on TNFD recommendations
The Taskforce on Nature-related Financial Disclosures (TNFD) requires companies to appropriately assess their dependence, impact, risks and opportunities related to natural capital and biodiversity, and to disclose that information to investors and others. As an environmental value-creation company, the Daiseki Group has always been aware of its dependence on finite materials and has made efforts to conserve resources. We have also worked to understand the impact of our business activities on the natural environment and the risks and opportunities that may arise from those impacts, and to manage and disclose such information. In addition, in 2024, we began analysis using the LEAP approach, which is an assessment methodology developed by TNFD.
As we aim for the realization of the Daiseki Group purpose, which is to be "an environmental value-creation company contributing to society through the environment by making the best use of limited resources," we will continue to promote efforts to solve the environmental issues that exist for the natural capital related to our business activities.
Daiseki's attitude toward the general requirements
The application of materiality
The Daiseki Group derives more than 90% of its revenues from environmental business. We recognize that our dependence and impact on natural capital and the risks and opportunities that arise from that dependence and impact have an effect not only on the natural environment itself, but also on our financial condition in terms of business continuity and profitability. Therefore, in assessing our dependence and impact on natural capital, and when assessing our risks and opportunities, we assess and disclose both the aspects where our business activities are affected by the natural environment and the aspects where our business activities affect the natural environment, based on double materiality.
The scope of disclosures
The Daiseki Group has already been assessing the dependence and impact of our business activities on natural capital and assessing our risks and opportunities, and we have made the necessary disclosures. Of all the Daiseki business, our industrial waste collection, transportation, intermediate treatment, and recycling business is financially important because it generates more than 50% of the Daiseki Group's total revenues. In addition, these business areas are extremely important in that they handle special control industrial waste, PRTR substances, and other materials that could have a significant impact on the natural environment and have an effect on natural capital if handled improperly. We therefore decided to start the disclosure of more detailed information based on the TNFD recommendations from the Daiseki business in industrial waste collection, transportation, intermediate treatment and recycling.
With regards to more detailed analysis and assessment and more extensive disclosure, we will consider this as we continue to assess the dependence and impact of our business activities and our risks and opportunities, including with consideration of our dialogue with stakeholders and the social demands.
The location of nature-related issues
The Daiseki Group recognizes the localized and regional nature of nature-related issues. In the analysis conducted prior to this disclosure, we identified the points of contact with nature and our dependence and impact in each of the regions where we operate, as well as areas of concern that are close to those regions. On the other hand, Daiseki collects and transports industrial waste throughout Japan, so it was recognized that due to this characteristic of our business, we have a common dependence and impact on nature and common risks and opportunities that are not dependent on the characteristics of each region.
Therefore, in this disclosure, we have assessed the dependence and impact, and risks and opportunities for Japan as a whole, which includes the regions where we conduct our operations for the intermediate treatment of industrial waste and manufacturing of recycled products.
Integration with other sustainability-related disclosures
The Daiseki Group has already disclosed the results of analysis corresponding to the TCFD recommendations, which were published prior to the TNFD recommendations. From those results, we recognize the strong links between nature-related and climate-related issues, that there are synergies, contributions and trade-offs in the actions to address both areas, and the need to ensure consistency between the actions.
The time horizons considered
The Daiseki Group recognizes that whereas the risks handled in conventional risk management are ones that can materialize in the relatively short term, the nature-related risks and opportunities are ones that can materialize over the medium to long term. On the other hand, we also believe that predicting the changes in natural capital that will bring about these risks and opportunities is often difficult due to uncertainty and a lack of knowledge. Therefore, in this disclosure, we have assessed the possible dependence, impact, risks and opportunities that may arise in the short term (within about 5 years).
The engagement of Indigenous Peoples, Local Communities and affected stakeholders in the identification and assessment of the organization's nature-related issues
At the Daiseki Group, we recognize that our business activities can affect not only natural capital but also local communities and many other stakeholders. This is why we also emphasize stakeholder engagement in our risk management process, including in the assessment of our dependence and impact on natural capital, and assessment of the risks and opportunities created by such dependence and impact.
Disclosure recommendations for all sectors in the TNFD recommendations
Governance
Our response to climate change-related issues and nature-related issues is mainly implemented by our Sustainability Headquarters, which is headed by the Daiseki President and Representative Director and operates under the supervision and guidance of the Board of Directors. The Sustainability Headquarters reports to the Board of Directors on the progress of measures for nature-related issues, including the various analysis and assessment results, and stakeholder engagement. The Headquarters also provides information to support the Board's decision-making on nature-related issues.
Strategy
In line with the LEAP approach developed by TNFD, for the assessment of the direct operations portion of the value chain in the industrial waste collection, transportation, intermediate treatment, and recycling operations of Daiseki, we set the local areas of the Works as the regions subject to assessment and performed analysis of our dependence and impact on natural capital, and assessment of our risks and opportunities.
Identification of dependence and impact
In order to assess the dependence and impact in each stage of the value chain, we used the ENCORE tool (https://www.encorenature.org/en) developed by the Natural Capital Finance Alliance (NCFA) and performed an assessment based on the results of that assessment and the actual situation of our business activities. As a result, we again recognized the dependence that our intermediate treatment business has on ecosystem services such as solid waste purification and water purification, and that we have various impacts on natural capital that are common to both our waste collection and transportation business and our intermediate treatment business, including sound and light disturbance, greenhouse gas emissions, air pollution substance emissions, solid waste generation, and the discharge of hazardous materials into water and soil.
| Dependence on ecosystem services | Collection and transportation | Intermediate treatment |
|---|---|---|
| Water supply | ||
| Climate regulation | ||
| Rainfall regulation | ||
| Local climate regulation | ||
| Air purification | ||
| Soil retention | ||
| Solid waste purification | ||
| Water purification | ||
| Water circulation regulation | ||
| Flood mitigation | ||
| Typhoon mitigation | ||
| Noise reduction | ||
| Biological adjustment | ||
| Dilution by air and ecosystems | ||
| Sensory pollution mitigation |
| Impact on natural capital | Collection and transportation | Intermediate treatment |
|---|---|---|
| Disturbances due to sound and light | ||
| Greenhouse gas emission | ||
| Air pollution substance emission | ||
| Solid waste generation | ||
| Land use | ||
| Discharge of hazardous materials into water and soil | ||
| Water use | ||
| Invasive alien species |
Degree of dependence and impact
Weak
Medium level
Strong
Heat map of the dependence and impact on natural capital of collection, transportation, and intermediate treatment by Daiseki
In addition, we used the Aqueduct tool to assess the water risk in the regions of our business bases, etc., and assessed the important areas for ecosystems and biodiversity using the World Database on Protected Areas (WDPA) as a reference, and identified the regions requiring attention. In the results, our water risk was low in all regions, with risk assessments of low to moderate, and we identified no protected areas or other areas of particular priority in the vicinity of our business locations. On the other hand, we also recognized that there may be regions that are considered protected areas under the WDPA in the areas around the trunk roads that we use for collection and transportation. Therefore, it was considered necessary to conduct risk assessments related to natural capital when expanding the areas of our business in the future.
Risks and opportunities and current initiatives
Based on the highly important areas of dependence and impact that were identified, we created a list of possible risks and opportunities based on the discussions held at the departments responsible for sustainability. We then assessed each of those items for the likelihood of occurrence and impact (financial impact and negative impact on natural capital) based on double materiality. In addition, we summarized the status of our efforts to address each risk and opportunity. These assessments were also based on the results of the analysis we had conducted previously based on the TCFD recommendations.
Risk assessment results
| Risk classification | Main risks | Assumed business risks | Financial impact of business risks | Possibility of occurrence | Negative impact on natural capital | Status of efforts | |
|---|---|---|---|---|---|---|---|
| Physical risks | Acute and chronic | Contamination of soil by waste and hazardous materials | Contamination of soil by waste after our intermediate treatment | 15 billion yen or more | Medium | Large | We manage landfill sludge using in-house standards that are stricter than the legal requirements |
| Discharge of industrial waste into the soil during transportation and treatment processes | We thoroughly implement the prevention of waste leakage accidents during transportation and treatment processes | ||||||
| Contamination of water resources by waste and hazardous materials | Discharge of contaminants into a river or sewer due to the malfunction of activated sludge treatment facilities | 15 billion yen or more | Medium | Large | We manage the wastewater from activated sludge facilities using in-house standards that are stricter than the legal requirements | ||
| Discharge of industrial waste into a river during the treatment process | Maintenance and management of activated sludge facilities | ||||||
| Outflow of industrial waste into a river during transportation | We thoroughly implement the prevention of waste leakage accidents during transportation and treatment processes | ||||||
| Pollution of the air environment due to the discharge of air pollution substances | Air pollution substances in excess of emission standards are released into the atmosphere from soot and smoke generating facilities such as a boiler | Less than 3 billion yen | Low | Medium | Comply with emission standards at all soot and smoke generating facilities | ||
| Impact on the natural environment due to foul odor, noise, and vibration | The odor, noise, or vibration at the site boundaries exceeds the legal limits | 3 to 15 billion yen | Medium | Large | Comply with legal emission standards for odor, noise, and vibration | ||
| Worsening of global warming due to greenhouse gas emissions | Factory damage and operations shutdowns due to natural disasters such as floods caused by extreme weather conditions | 15 billion yen or more | Medium | Large | Conduct disaster drills, develop BCP, and reduce CO2 emissions | ||
| Transition risks | Policy | Tighter regulation of environmental laws and regulations (air, water, soil, etc.) | Decrease in the amount of industrial waste treated when wastewater treatment regulations restrict the amount of wastewater that can be discharged from activated sludge facilities into rivers and sewers | 15 billion yen or more | Low | －* | Continue to implement technological development, including for the diversification of recycling methods (increase in the volume of recycling treatment) |
| Impact on the current industrial waste treatment due to new chemical regulations | 3 to 15 billion yen | Medium | －* | ||||
| Introduction of carbon pricing mechanisms | Increase in cost of response for CO2 emission reduction | 15 billion yen or more | High | －* | Reduction of CO2 emissions | ||
| Market | Occurrence of client demand for other companies in the same industry that have a smaller environmental footprint | Decrease in sales due to loss of demand for recycled fuels and recycled heavy oil, which are positioned as equivalent to fossil fuels around the world | 15 billion yen or more | Medium | －* | Promote circular economy-type business, including increased material recycling | |
| Reputation | Occurrence of negative feedback from clients regarding products with high environmental impact | ||||||
| Technology | Attacks from other companies in the industry due to their commercializing treatment technologies that have a lower environmental impact | Decrease in sales in industrial waste treatment business due to a decrease in the volume of industrial waste treatment outsourced | 15 billion yen or more | High | －* | Acquisition of new technologies through technology development and M&A | |
| Liability | Risk of prosecution, litigation, and compensation for violation of the environmental laws and regulations | Complaints, lawsuits, and compensation for the improper treatment of industrial waste, or for violations of the standards of relevant environmental laws and regulations | 15 billion yen or more | Low | －* | Conduct in-house compliance study sessions | |
| Obtain certification as an excellent company under the system of excellent waste disposer certification | |||||||
| Operation of a whistleblower system | |||||||
*We assessed that the business risks related to transition risks were not matters that would have a negative impact on natural capital.
Opportunity assessment results
| Opportunity classification | Main opportunities | Assumed business opportunities | Financial impact of business opportunities | Possibility of occurrence | Negative impact on natural capital | Status of efforts | |
|---|---|---|---|---|---|---|---|
| Opportunities | Market/Products and services | Increased demand for recycling treatment services and recycled products due to the spread of the circular economy | Increased volume of waste treatment outsourced and increased sales of recycled products | 15 billion yen or more | High | Large | Continue technological development for the transition to a circular economy (establishment of new business) |
| Increased demand for recycling treatment services due to the strengthening of restrictions in environmental laws and regulations | Increased volume of waste treatment outsourced | 15 billion yen or more | Medium | Large | Continue to implement technological development, including for the diversification of recycling methods (increase in the volume of recycling treatment) | ||
| Increased demand for recycling treatment services that have lower greenhouse gas emissions | Increased volume of waste treatment outsourced | 15 billion yen or more | High | Large | Continue technological development for the transition to a circular economy (establishment of new business) | ||
| Increase the avoided emissions when reducing greenhouse gas emissions | |||||||
Risk and impact management
In the Daiseki Group, the Sustainability Headquarters identifies and assesses the nature-related dependence, impact, risks and opportunities. In addition, prioritization, including cash allocation, is decided by the Board of Directors based on the results of the assessment by the Sustainability Headquarters, and the Board of Directors instructs the Sustainability Headquarters to take the necessary actions. The Sustainability Headquarters oversees the management of the dependence, impact, risks and opportunities based on that instruction, and asks the Group companies and Works to take action. These risk management processes and systems are integrated into company-wide risk management together with climate change risk management.
Metrics and targets
We have made progress in our efforts for the risks that were judged in the assessment of dependence, impact, risks and opportunities to have a large negative impact on natural capital. However, we have recognized that more effort is needed for the transfer risks where the strengthening of initiatives for natural capital is demanded, and for the opportunities that arise primarily from those risks. Daiseki has already started initiatives to address these risks and opportunities in the context of climate change response and environmental conservation, including the setting of targets.
From now on, we will continue to analyze, assess, and manage our dependence, impact, risks and opportunities related to natural capital, and will make the necessary disclosures.
Initiatives to address significant risks and opportunities related to natural capital
| Item | Identified risks and opportunities | Indicator | Status of efforts |
|---|---|---|---|
| Risk | Risks in the sophistication of waste treatment due to the strengthening of restrictions in environmental laws and regulations | Volume of material recycling treatment |
258,300 tons per year or more (FY2031) |
| Risks in the introduction of carbon pricing mechanisms | Scope1, Scope2, and Scope3 emissions compared to FY2022 |
Scope1+Scope2:34% reduction |
|
| Risks in the loss of demand for recycled fuels | Number of new businesses established |
3 cases (FY2031) |
|
| Risks of attacks from other companies in the industry due to new technology development | Number of new businesses established | ||
| Market share in industrial waste treatment in Japan (regarding factories with 100 or more employees) |
30% (FY2031) |
||
| Opportunities | Increased demand for circular economy type recycling treatment services | Number of new businesses established |
3 cases (FY2031) |
| Increased demand for recycling treatment services due to the strengthening of restrictions in environmental laws and regulations | Volume of material recycling treatment |
258,000 tons per year or more (FY2031) |
|
| Increased demand for Daiseki recycling treatment services that have low greenhouse gas emissions | Number of new businesses established |
3 cases (FY2031) |
|
| Avoided emissions when reducing greenhouse gas emissions |
785,000 t-CO2 per year (FY2028) |
Disclosure items for core global disclosure metrics and additional disclosure metrics for nature-related dependence and impact
| Metric No. | Indicator | Metric | Disclosure location |
|---|---|---|---|
| Climate change | Greenhouse gas emissions | ||
| C2.1 | Wastewater discharge | Volume of wastewater by discharge destination | |
| C2.2 | Waste generation and treatment | Amount of hazardous and non-hazardous waste generated, and weight of landfill avoided | |
| C2.4 | Total air pollutants other than greenhouse gases | NOx, SOx, particulate matter | |
| A2.0 | Wastewater treated, reused/recycled or avoided | Volume of recycling received, volume of recycled resources manufactured and shipped | |
| A3.0 | Total water consumption and water withdrawals | Total of water withdrawal and water consumption | |
| A3.2 | Water reduced or reused/recycled | Volume of rainwater used |
Disclosure items for core global disclosure metrics for nature-related risks and opportunities
| Metric No. | Indicator | Metric |
|---|---|---|
| C7.2 | Details and amounts of fines, penalties, and lawsuits incurred during the fiscal year due to nature-related negative impacts | |
| C7.4 | The increase in and percentage of revenues from products and services that have a demonstrable positive impact on nature, and a description of their impact |