Response to TCFD Recommendations
Promoting Information Disclosure of Climate Change
Regarding responses to climate change and energy issues as one of the most important material issues in the environmental field, Honda announced in April 2021 its vision to "realize carbon neutrality for all products and corporate activities Honda is involved in by 2050."
We have declared our support to the Task Force on Climate-related Financial Disclosures (TCFD) established by the Financial Stability Board (FSB) and disclose information based on the information disclosure framework recommended by the TCFD.
We will promote the disclosure of information related to climate change, while conducting scenario analysis on climate change risks and opportunities and reflecting the results in our management strategies.
See below for Metrics and Targets in Response to TCFD Recommendations.
Governance
Monitoring System by Directors
As climate change can have a significant impact on Honda's business performance as a whole, we continuously hold meetings of the World Environment and Safety Strategy Committee every year. The Committee monitors long-term policies, targets, strategies and progress related to climate change and other environmental and safety issues. The total CO2 emissions reduction targets set by the Committee are reported to and supervised by the Board of Directors.
Please refer to "Remuneration Structure for Directors" for our remuneration structure for Directors and Executive Officers, which takes into account ESG aspects.
Roles of Members of Top Management
The World Environment and Safety Strategy Committee is chaired by the CEO. Climate change and other environmental issues handled by each business and region are reported to and discussed at the Committee. For these issues, the Committee develops strategies, sets CO2 emissions reduction targets, formulates plans to achieve the targets, monitors progress and handles unmet targets. Important matters are reported to the Executive Council and Board of Directors.
Please refer to "Management Structure" for our management structure for the overall area of sustainability, including activities of the World Environment and Safety Strategy Committee.
Strategies
Climate change causes various impacts, not just on the automobile industry but also on people's living environment and lifestyles. Honda utilizes scenario analysis noted in the TCFD recommendations to evaluate and examine the impacts of climate change on business. Our scenario analysis uses 2030 as the target year and identifies climate change risks and opportunities for Honda under multiple scenarios, including a net zero scenario. The identified risks and opportunities are reflected in our company-wide strategies and strategies of each business.
Climate Scenarios Used by Honda
Based on the reports of the International Energy Agency (IEA) and Intergovernmental Panel on Climate Change (IPCC), we have defined two scenarios to identify risks and opportunities: 1.5°C and 4°C scenarios. These scenarios assume the perspective of the world and changes in the business environment, in the future. Even though we already have an experience in dealing with flood damage in Thailand and Mexico, we expect that various events, including intensifying natural disasters, will occur as climate change proceeds and impact our business environment.
In our scenario analysis on the automobile, motorcycle and power products businesses, we have identified risks and opportunities in each scenario, based on the transition and physical risks and opportunities described in the TCFD recommendations, and examined their degree of impact on our financial condition. The failure to make an appropriate response to the anticipated events in each scenario will pose a risk to our business. Nonetheless, we are undertaking initiatives so that we can generate new business opportunities by advancing Honda's technologies, products and services. In order to minimize damage or the risk of incurring damage caused by a natural disaster, we will promote the establishment of a stable production structure through a global value chain.
Climate Scenarios Used by Honda
1.5°C Scenario
We have developed our 1.5°C scenario by using the Net Zero Emissions by 2050 Scenario (NZE) of the IEA and the IPCC Representative Concentration Pathway (RCP) scenarios (RCP2.6 and RCP1.9).
- In the 1.5°C scenario, we assume that measures to achieve carbon neutrality by 2050 will be promoted across the world, with widespread use of carbon-free products and renewable energy.
- In the automobile industry, we expect even more stringent regulations on fuel efficiency and zero-emission vehicles (ZEVs) toward decarbonization and a rise in demand mainly in developed countries for electric vehicles (EVs) and fuel cell vehicles (FCVs).
- In parallel with the tightening of regulations, we assume that customers' sense of value will shift, with an increasing number of customers preferring carbon-free products, such as EVs and FCVs, and services.
- Toward decarbonization, we also expect an advancement and the widespread use of renewable energy and energy-saving clean technologies.
4°C Scenario
We have developed our 4°C scenario by using the Stated Policies Scenario (STEPS) of the IEA and RCP8.5, scenarios of the IPCC.
- In the 4°C scenario, we assume no reinforcement of decarbonization policies, a continued rise in average temperatures and more frequent and more severe natural disasters.
Honda’s Key Risks, Opportunities and Responses
Risks
| Risks | Time frame* |
||
|---|---|---|---|
| 1.5℃ | More stringent fuel efficiency and ZEV regulations |
|
Short / medium / long term |
| 1.5℃ | Changes in customers' sense of value |
|
Medium / long term |
| 1.5℃ | Widespread use of energy technologies |
|
Short / medium term |
| 4℃ | More frequent and severe natural disasters |
|
Short / medium / long term |
For time frame, short, medium and long mean less than one year, one to less than three years and three years or longer, respectively.
Opportunities
| Opportunities | Time frame* |
||
|---|---|---|---|
| 1.5℃ | More stringent fuel efficiency and ZEV regulations |
|
Short / medium / long term |
| 1.5℃ | Changes in customers' sense of value |
|
Medium / long term |
| 1.5℃ | Widespread use of energy technologies |
|
Short / medium term |
| 4℃ | More frequent and severe natural disasters |
|
Short / medium term |
For time frame, short, medium and long mean less than one year, one to less than three years and three years or longer, respectively.
Responses
| Responses | ||
|---|---|---|
| 1.5℃ | More stringent fuel efficiency and ZEV regulations |
Honda Report 2022 p41 (PDF: 8.9MB)
Honda Report 2022 p45, 49, 52 (PDF: 8.9MB)
|
| 1.5℃ | Changes in customers' sense of value |
Honda Report 2022 p41 (PDF: 8.9MB)
Honda Report 2022 p45, 49, 52 (PDF: 8.9MB)
|
| 1.5℃ | Widespread use of energy technologies |
|
| 4℃ | More frequent and severe natural disasters |
|
Risk Management
Honda has formulated the Honda Global Risk Management Policy and has been conducting activities that will lead to sustainable growth and stable corporate management by actively controlling risks. Under the supervision of the company-wide Risk Management Officer elected by the Board of Directors, we categorize, manage and monitor risks defined as potentially inflicting significant damage or loss on the Honda Group's tangible and intangible assets, corporate activities and stakeholders and possibly affecting our corporate management. Each organization identifies and evaluates risks. Based on the evaluation results (frequency of occurrence and degree of impact in terms of monetary amounts), the Operations Risk Management Officers identify priority risks for respective Operations.
Based on the recognition of risks within Honda and reflecting external risk trends, we also identify risks deemed particularly important for an entire corporate entity as company-wide priority risks and check and discuss our response status against them. Management of these risks is conducted by the Risk Management Committee established within Honda, and details of their activities are reported to the Executive Council as appropriate. The risk items managed and monitored by the Committee also cover regulatory, natural disaster and other risks arising from climate change, and we are promoting more effective risk management activities while considering the characteristics of respective Operations.
For risks related to environmental regulations, for example, we manage risks related to both existing and new regulations. In surveying, evaluating and monitoring risks of the occurrence of natural disasters, we use Aqueduct of the World Resources Institute (WRI) and Water Risk Filter of the World Wildlife Fund (WWF) to assess water risk. The assessment results are reported to the Risk Management Committee on a periodic basis.
Environmental Management Structure
At the annual meeting of the World Environment and Safety Strategy Committee, Honda formulates medium- and long-term environmental policies and plans at the global level encompassing measures against climate change on the basis of company-wide direction and medium- and long-term business plans.
The progress of Honda's environmental initiatives and the themes applicable worldwide are discussed and aligned among the Business Operations and Regional Operations. The Corporate Planning Supervisory Unit collects relevant information from the Business Operations, discusses the priorities of these initiatives and themes and reports them at the meeting of the World Environment and Safety Strategy Committee. We are striving to continuously enhance environmental management by reflecting them in our next medium-term business plan and rotating the plan-do-check-act (PDCA) cycle at each of the Business Operations, Regional Operations and environmental divisions.
Following the decisions made at the above meeting, the World's Six Region Environmental Committee, made up of the environmental divisions of the respective Regional Operations, also meets to discuss environmental measures in each region. After sharing information at the meeting, these divisions formulate concrete action plans and then implement necessary measures.
Toward achieving the company-wide policy of Triple Action to ZERO and 2030 milestones, we have recently been facilitating collaboration through various global meetings to promote company-wide environmental initiatives while giving consideration to local situations. Efforts include sharing information on national regulations and the actions of competitors in each region and developing and promoting low-carbon technologies for use in products.
Environmental Management Structure
