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Overview of "Yamaha Motor Group Environmental Plan 2050"

Introducing an overview of the Yamaha Motor Group Environmental Plan 2050

Environmental Plan 2050

Yamaha Motor Co., Ltd. announced the “Yamaha Motor Group Environmental Plan 2050” in December 2018. This Plan aims to reduce “CO2 emissions during product use,” “CO2 emissions during manufacturing and transport” and “the volume of resources usage” by 50% from the base year 2010 by the target year 2050. At the same time, the Plan also involves taking initiatives regarding environmental preservation and biodiversity from a global perspective.

Overview of the Plan

Action Themes 2050 Targets Priority Actions
Low Carbon Society (Products)
Providing environmentally friendly personal mobility
50% reduction of CO2 emissions from products by 2050 (on FY2010 levels)
1 Reduction of CO2 emissions from use of products by users(t-CO2/unit sales) Promotion of development to improve fuel efficiency
2 Development, promotion and spread of next-generation mobility Promotion of development and the spread of products that respond to energy diversification
(Business Activities)
50% reduction of CO2 emissions throughout life cycle (on FY2010 levels)
3 Reduction of CO2 emissions generated in operation of productions(t-CO2/net sales) Reduction of CO2 emissions per sales at factories globally
4 Reduction of CO2 emissions in logistics Reduction of CO2 emissions per transportation unit
Recycling Society (Resource)
50% reduction of “resource use” (on 2010 levels)
5 Reduction of new resources use by recyclable resources use Promotion of saving of limited resources by 3R development/manufacturing
6 Reduction of waste generated in operation of production Promotion of waste reduction
7 Reduction of water consumption in operation of production Promotion of water consumption reduction activities based on water stress scenarios
8 Reduction of packing materials in logistics Enhancing returnable packing materials
Society in Harmony with Nature Addressing environmental preservation and biodiversity globally
9 Activities to protect fields of product use by users (land, sea and air) Promotion of activities to preserve nature globally
10 Activities to protect ecosystems of land/ocean Promotion of activities in line with our outline of biodiversity initiatives
11 Activities to contribute to solving environmental issues of each country and region Carrying out activities by all employees to contribute to a sustainable world
Management Management
12 Strengthening of compliance with environmental laws and regulations and management of chemical materials in products Thorough implementation of environmental compliance in business activities in each country and region
13 Contribution to alleviation of air pollution globally Introduction of mobility in conformity with regulations on exhaust emissions in each country and region
14 Reduction of VOC emissions in operation of production Promotion of VOC reduction per unit of painted area
15 Promotion of environmental activities in collaboration with suppliers Promotion of engagement with suppliers and reduction of burden through environmental surveys
16 Fostering awareness of environmental preservation through environmental education globally Carrying out environmental education according to environmental issues in each country and region

2050 Society

The current global population of 7.7 billion is predicted to reach 9.7 billion by 2050, increasing 2 billion over the next three decades. Economic growth in Africa and India, among other regions, will drive the world's consumption of primary energy, increasing 1.4-fold from the current level of 13.9 billion tons to 19.2 billion tons by 2050. Based on these predictions, it is assumed that the world will face a significant shortage of resources and energy in 2050.

In terms of the global environment, the world is moving toward decarbonization in an effort to reduce CO2 emissions—believed to be the primary cause of global warming—shifting from fossil fuels to alternative energy sources in the use of primary energy. In light of these predictions and assumptions concerning society and our business environment in 2050, we identified long-term environmental issues.

Population Growth

x1.3
Graph

Africa, India, and China combined account for 55% of the total population.
(Africa: 2.4 billion / India: 1.6 billion / China: 1.4 billion)

Source: Based on data from World Population Prospects 2019

Increased Primary Energy Consumption

x1.4
Graph

Use of fossil fuels, which cause global warming, makes up 83%.

Source: Based on data from IEA's World Energy Balances

Depletion of Resources

Some experts predict that if the economic development of emerging nations continues to drive the rapid growth of demand for mineral and fossil resources, all known deposits of underground mineral resources will be exhausted by 2050.

Graph

Stacked bar graph: Representing different metals
Red line: Total material requirement of deposit amount

Source: Based on National Institute for Materials Science data

Risks concerning Global Reduction of Greenhouse Gases

The Paris Agreement, an international treaty adopted at the 21st Conference of the Parties (COP21) to the UN Framework Convention on Climate Change, was ratified by 185 countries on April 26, 2016. With the aim of enhancing worldwide efforts against the threat of climate change, the Paris Agreement established "mitigation" through reduction and absorption of greenhouse gas emissions and "adaptation" to the impacts of greenhouse gases as two key elements in achieving the goal of keeping the rise in the global average temperature to well below 2°C above pre-industrial levels, or to limit it to 1.5°C by the end of the 21st century. According to the "Special Report on Global Warming of 1.5°C," even if all the countries fulfilled the nationally determined contributions (NDCs) for 2030 that they submitted in connection with the Paris Agreement, we will still be 12 gigatons short of achieving the 2°C target, and 29 gigatons short with regard to the 1.5°C target.

Identification of Material Issues (Materiality)

We intend to address not just climate-related risks but also a variety of social issues in ways that embody the unique style of Yamaha. Resolving social issues is also very important for Yamaha Motor's sustainable growth, and therefore, in formulating our long-term vision and medium-term management plan, we have used the steps shown below to identify material social issues that we can resolve using our strengths.

  1. step1

    Selection of social issues

    The Corporate Communication Division and the Sustainability Division looked at the wide range of social issues referenced in the SDGs and the Global Risks Report, and selected those that will have the greatest impact on our use and procurement of management resources, and for which the resolution will make the greatest contribution to the enhancement of our corporate value. We also evaluated the materiality of social issues from the perspective of stakeholders, referencing the valuations of ESG rating institutions.

  2. step2

    Categorization of social issues

    Through consultation with operating divisions, functional divisions, and corporate divisions, the divisions clarified the relationships between the issues selected in Step 1 and each division's policies and activities, and those that should be addressed Companywide were aggregated and categorized.

  3. step3

    Identification of material social issues

    All of the Company's officers deliberated social issues aggregated and categorized in Step 2 at the Management Committee and the Board of Directors meetings, and identified "material social issues" that should be addressed Companywide using our strengths, corporate philosophy, and unique capabilities.

  4. step4

    Incorporation into medium-term management plan

    Initiatives to resolve the identified material social issues have been incorporated into the medium-term management plan. The rigorous implementation of these initiatives will be monitored going forward.

Selected Social Issues

* Text in red: climate-related issues

Material issue areas

Importance to stakeholders

  • Financial crisis in important economic zones
  • Unmanageable inflation
  • Failure of national governance
  • Failure of regional or global governance
  • Inter-government conflict over regional problems
  • Deepened social uncertainty
  • Abuse of technological progress
  • Introduction of industrial processes taking into account clean technologies and efficient use of resources
  • Heightened awareness of sustainability
  • Promotion of economic growth based on fair work environments
  • Reduction of waste materials
  • Curtailment of corruption and bribery
SDGs 09 SDGs 12
  • Improved energy efficiency
    (including promotion of use of renewable energy)
  • Promotion of use of inexpensive, reliable energy
  • Promotion of safe and secure work environments
  • Advancement of diversity and inclusion
  • Effective use of water resources and prevention of pollution
  • Securing of clean water resources
SDGs 07 SDGs 06
  • Abolition of inequality
  • Responses to multi-stakeholders
  • Promotion of innovation
    (active use of global partnerships)
  • Implementation of fair taxation
  • Promotion of sustainable industrialization
  • Elimination of discrimination against women/protection of human rights
    Use of women's skills
  • Strengthened disaster prevention and response
  • Eradication of forced labor, human trafficking, and child labor
  • Increased employment for socially vulnerable people
SDGs 11
  • Prevention of pollution and damage from harmful chemical substances
  • Strengthened measures to address climate change
  • Sustainable use of natural resources
  • Promotion of innovation (promotion of sustainable industrialization)
  • Promotion of innovation (promotion of sustainable forms of consumption and production in developing countries)
SDGs 13 SDGs 12
  • Strengthened support for emerging and developing countries
  • Promotion of protection and recovery of land ecosystems
  • Provision of stable living environment
  • Halting of deforestation
  • Protection and recovery of marine ecosystems
SDGs 14 SDGs 15
  • Expansion of educational systems (including vocational training)
  • Enhanced education environment in developing countries
  • Promotion of social infrastructure development
  • Prevention of traffic accidents
  • Protection of small-scale agricultural and fishing industries
  • Advancement of sustainable fishing industry
  • Improved access to fishing areas and markets in least developed countries

Importance to Yamaha Motor

Climate-related Risks and Opportunities

Material environmental and social issues

  • Strengthened measures to address climate change
  • Improved energy efficiency
SDGs 07 SDGs 13
  • Effective use of water resources and prevention of pollution
  • Reduction of waste materials
  • Introduction of industrial processes taking into account clean technologies and efficient use of resources
  • Sustainable use of natural resources
SDGs 06 SDGs 09 SDGs 11 SDGs 12
  • Promotion of protection and recovery of land ecosystems
  • Halting of deforestation
  • Protection and recovery of marine ecosystems
SDGs 14 SDGs 15
  ▼ ▼ ▼

Action Themes

Low carbon society

Recycling loops in society

Society in harmony with nature

Risks

Short-term
Costs for addressing regulations may increase significantly, with each country and territory moving to tighten motorcycle emission standards, and the U.S. introducing more stringent EPA and CARB emission standards for marine engines.
Medium-term
Growth of demand in India, Africa, and other regions may increase CO2 emissions from the distribution of goods, and the introduction of carbon tax may increase logistics costs.
Long-term
Heightened environmental awareness may lead to decreased sales of products that use fossil fuels. Introduction of carbon tax may increase manufacturing costs.
Short- to medium-term
In emerging nations and elsewhere, severe air pollution from the use of motorcycles may lead to tighter regulations, including a ban on riding motorcycles in cities.
Long-term
Increased consumption of resources accompanying the economic growth of emerging nations may heighten procurement risks, including a shortage of resources and cost increase.
Short- to long-term
Climate change may trigger abnormal weather events, including forest fires, droughts, extreme temperature changes, storms, and snowfall, destroying the ecosystems of the oceans, mountains, and forests where our products are used.

Opportunities

Short- to medium-term
Sales of models with improved fuel economy may increase. In emerging nations, motorcycles may be widely adopted as an inexpensive means of transportation with minimal social infrastructure costs.
Long-term
Electric models may be widely adopted.
Short-term
Lightweight and compact low-speed mobility vehicles (land cars) may be widely adopted as a means of transportation that helps minimize social infrastructure resources and costs.
Medium-term
Motorcycle and marine rental business may grow.
Long-term
In terms of engineering, manufacturing, and marketing, ultra-compact mobility vehicles that are small, lightweight, and resource-saving may be incorporated into the social infrastructure.
Short- to long-term
Increased awareness of the need to conserve the natural environment may trigger growth of the outdoor market where people seek and cherish interaction with nature.

Impact of CO2 Emissions

The world produced 32.8 billion tons of CO2 emissions in 2017. Of this amount, motorcycles accounted for just 0.05% of the total as a source of emissions and are therefore a mobility option with an extremely low environmental impact. In 2019, CO2 emissions across the Yamaha Motor Group's entire supply chain were 155,847 t-CO2 for Scope 1, 384,258 t-CO2 for Scope 2, 28,041,247 t-CO2 for Scope 3, and 28,581,352 t-CO2 overall. Scope 3 "Category 11. Use of products sold" accounted for 83.5%, followed by "Category 1. Purchased products and services (Emissions associated with sourcing of raw materials)" at 12.3%. In setting reduction targets for CO2 emissions, we recognize the importance of improving the fuel (electric) efficiency of our products, promoting the adoption of next-generation mobility vehicles, and using resources efficiently.

The world CO2 emissions - Source of emissions
The world CO<sub>2</sub> emissions - by source of emissions
Breakdown of CO2 emissions for the entire life cycle
Fig.
Fig.

Governance

Roles of the Board of Directors of an Organization in Overseeing Climate-related Issues

Yamaha Motor contributes to solutions to issues that involve realizing a sustainable society in a variety of countries and regions by utilizing its businesses and human resources, tangible assets and know-how built through its business operations. At the same time, we aim to be a sustainable company, as a member of the global society. Therefore, under the Groupwide "Basic Policies of CSR," we position "environment and resources," "transportation, education and industry," "innovation" and "work-life balance and productivity" as material social issues that require the attention of Yamaha Motor in the medium- to long-term growth strategies in order to achieve the internationally agreed targets of the SDGs. We also set the KPIs associated with the goals of each business to seize growth opportunities. Meanwhile, we believe that dealing with social issues is an important part of risk management. We have signed the UN Global Compact, and we appropriately deal with global risks that impede sustainability by practicing the principles of "human rights," "labor," "environment" and "anti-corruption." We properly disclose information so that our stakeholders can easily obtain information on these initiatives.

The Board of Directors formulates policies on dealing with issues concerning sustainability and regularly reviews their implementation status. With regard to issues concerning sustainability, the Board of Directors oversees the Sustainability Committee, chaired by the President and Chief Executive Officer and comprising executive officers appointed by the Board of Directors.

Fig.

With regard to issues concerning sustainability, we positioned the environmental field in particular as an important area to be tackled by management, and established the Environment Committee, chaired by an executive officer in charge of environmental activities. The Environment Committee meets three times a year to discuss policies concerning the environment (e.g., policies on how to respond to recommendations from the TCFD) and visions, formulate the Yamaha Motor Group's long-term environmental plan (Environmental Plan 2050), and conduct annual reviews of how each operating division has performed against its targets. It reports its findings to the Board of Directors at least twice a year.

Strategy

World in a 1.5°C Scenario and 2°C Scenario

Graph

Source: Based on data from the IPCC Fifth Assessment Report

In the scenario corresponding to the pathway with the highest greenhouse gas emissions (RCP8.5 scenario), the global average surface temperature is predicted to rise by up to 4.8°C by 2100, causing a significant impact on human society and the ecosystem. The impact will vary considerably depending on to what degree the global temperature rise can be kept relative to pre-industrial levels. According to the IPCC's "Special Report on Global Warming of 1.5°C," in order to limit global warming to 1.5°C, CO2 emissions must be reduced by 45% from 2010 levels by 2030, and net zero emissions must be reached by 2050.

Human activities have caused the global average temperature to rise by about 1°C from pre-industrial levels (likely in the range of 0.8°C to 1.2°C), and the impact on nature and human activities is already evident. (Abnormal weather, rising sea levels, and declining volume of Arctic sea ice, for example.) If global warming continues at the current rate, temperatures are likely to rise by 1.5°C between 2030 and 2052, and its possible impacts and risks have been reported.

Scenario Analysis

Physical Risks Associated with Climate Change
  • 1. Sea level rise, coastal flooding
  • 2. Flooding in megacities
  • 3. Disruptions of infrastructure services, etc., due to extreme events
  • 4. Deaths and illnesses due to heat waves
  • 5. Threats to food security due to temperature rise, droughts, etc.
  • 6. Income loss in rural areas due to water shortage and reduced agricultural production
  • 7. Loss of marine ecosystems essential to the livelihoods of coastal areas
  • 8. Loss of terrestrial and inland freshwater ecosystem services
Major Impacts

Sea Level Rise

[1.5°C] Global mean sea level rise is projected to be in the range of 0.26 to 0.77 m by 2100 (M), approximately 0.1 m less than for a global warming of 2°C (M), and up to 10 million fewer people would be exposed to related risks (M).

[1.5–2°C] Main ice sheet instability in Antarctica and/or irreversible loss of the Greenland ice sheet could result in multi-meter rise in sea level over hundreds of thousands of years.

Flooding

The percentage of major rivers impacted by flooding will increase with global warming. Relative to 1976—2005 levels, population affected by flood hazards is projected to increase by:

[1.5°C] 100% (M).

[2°C] 170% (M).

Food

A rise in temperature by more than 4°C from the level at the end of the 20th century, combined with an increase in food demand, may pose a significant risk to global and regional food security (H). This risk is greater in low-latitude regions.

[1.5°C] Compared with 2°C, smaller reductions in yields and less quality deterioration of cereal crops in sub-Saharan Africa, Southeast Asia, and Central and South America (H).

[2°C] Compared with 1.5°C, reductions in food availability are larger in the Sahel, southern Africa, the Mediterranean, central Europe, and the Amazon (M).

Ecosystems

Global warming is expected to alter the global distribution of marine species. In susceptible areas, biodiversity is expected to decline (H). Experts believe that many species will be unable to follow the climate suitable for habitation at a medium to high rate of climate change (M).

[1.5°C] Coral reefs are projected to decline by a further 70–90% (H). 6% of insects, 8% of plants, and 4% of vertebrates are projected to lose over half of their habitats.

[2°C] Over 99% of coral reefs are projected to be lost (VH). The irreversible loss of marine ecosystems increases (H). 18% of insects, 16% of plants, and 8% of vertebrates are projected to lose over half of their habitats.

Source: IPCC's "Special Report on Global Warming of 1.5°C"
VH: Very high confidence H: High confidence M: Medium confidence

Major Risks Associated with Transitioning to a Low Carbon Society

Regulatory Risks

Leveraging our technological strengths in small, high-performance engines, we develop a wide range of products including motorcycles, outboards, personal watercraft, boats, fishing boats, ATVs, golf cars, and generators, and market them around the world. Our core business of motorcycle engines is significantly affected by the emission standards of each country and territory. If we are unable to develop a product that conforms to the standards, we face the risk of losing sales opportunities.
With regard to this risk, the regulations and certification division collects information about regulatory trends in each country and territory. In addition, the Environmental Regulation Management Committee, chaired by the executive officer in charge of the powertrain technology development division and comprising the Quality Assurance Division, Production Control Division, Powertrain Development Section, Electronics System Development Division, and Combustion System Development Division, works to accelerate decision-making on the advance development of technology to address the tightening of regulations and on the development of powertrains, and to minimize risks associated with the strengthening of emission standards in each country and territory.

New Regulatory Risks

If tighter regulations such as a ban on inner-city use of motorcycles and other vehicles that run on fossil fuels are introduced not only in Europe and other environmentally advanced countries but also in emerging countries faced with severe air pollution, we will end up losing sales opportunities unless we respond by electrifying our motorcycles and developing battery charging infrastructure.
With regard to this risk, staff in charge of the environment collect information on moves made by national governments and trends related to energy policy, and report their findings at Environment Committee meetings. Each operating and functional division discusses and determines how to respond, reports its decisions to the Board of Directors, and reflects them in specific business strategies.

We conduct manufacturing operations for our main motorcycle business at 30 locations in 20 countries, mainly in the ASEAN region. A considerable amount of energy is used during manufacturing, particularly in the engine casting process as well as painting process. If countries and territories around the world introduce regulations mandating a shift from fossil fuels to renewable energy sources, we face the risk of becoming less competitive due to increased energy costs.
To minimize risks associated with the tightening of energy standards in each country and territory, the Manufacturing and Production Engineering Center and the environmental facility division collect information on regulatory trends concerning energy costs in each country and territory. Moreover, the Environment Committee deliberates and discusses energy-related investment plans, how to procure renewable energy, and other matters, and the findings are reported to the Board of Directors following a review by the Management Committee.
According to a report by the Carbon Pricing Leadership Coalition (CPLC), carbon taxes will reach 80 dollars/t-CO2 by 2020 and 100 dollars/t-CO2 by 2030, assuming that all signatories to the Paris Agreement meet their reduction targets. Given that our CO2 emissions from production activities are the same as in 2019, the increase in production costs based on the above carbon taxes is estimated to be between 1.29 and 1.62 billion yen per year.

Information Disclosure Risks

If we fail to disclose a sufficient amount of information on the risks associated with climate change, we face the risk of a lawsuit being filed by stakeholders. With regard to this risk, staff in charge of the environment collect information on international trends related to information disclosure on matters concerning climate change, and report their findings at Environment Committee meetings. The Environment Committee deliberated and determined long-term environmental plans targeting 2050, as well as policies on how to respond to the SBTi and TCFD as an international requirement. It reported its decisions to the Management Committee and the Board of Directors, which voted on the matters. As a result, we declared our commitment to the SBTi in May 2018, announced the Yamaha Motor Group Environmental Plan 2050 in December 2018, and agreed to the recommendations of the TCFD in May 2019.

Technological Risks

Leveraging our technological strengths in small, high-performance engines, we develop mobility products with minimal environmental impact in terms of CO2 emissions and resource use, and market them around the world. Our efforts on the electrification of mobility vehicles date back to 1978 when we released an electric unit for golf cars, and in 1993 we launched PAS, the world's first electrically power assisted bicycle. By applying the control technology of the Robotics Business Unit, we are pursuing electrification of various product groups. For example, we released an electric unit for wheelchairs in 1995, an electric motorcycle in 2002, and an industrial-use drone in 2018.
Once manufacturers start accelerating their efforts to electrify automobiles and other vehicles, demand for rare earth will increase, potentially making it difficult to source raw materials. To address this risk, we are using materials and developing material technology that make less use of rare earth.

Market Risks

If governments introduce a ban on inner-city use of motorcycles and other vehicles that run on fossil fuels and similar regulations not only in Europe and other environmentally advanced countries but also in emerging countries faced with severe air pollution, we will end up losing sales opportunities unless we respond by electrifying our products and developing the necessary infrastructure. With regard to this risk for motorcycles, staff in charge of the environment collect information on moves made by national governments and trends related to energy policy, and report their findings at Environment Committee meetings. Each operating and functional division discusses and determines how to respond, reports its decisions to the Board of Directors, and reflects them in specific sales strategies.
In Taiwan, electrification of motorcycles is being promoted as part of an effort to combat air pollution, and the government has announced that it will ban the sales of gasoline motorcycles starting in 2035. As stated in our Environmental Plan 2050, we are aiming to reduce CO2 emissions from our products by 50% from 2010 levels. Under a policy of promoting the manufacturing and sales of small electric products, we have developed and launched our EC-05 electric scooter in Taiwan in a collaborative EV business with Gogoro Inc.

Reputation Risks

Efforts made by companies to address climate change have a major impact on their corporate value such as ESG investments. If we do not address climate change issues and disclose information to stakeholders appropriately, our corporate value may decrease.
To deal with this risk, in 2019 the IR and SR staff of the Corporate Communication Division at our headquarters held six briefing sessions for some 300 retail investors in Tokyo, Nagoya, and Osaka. In addition, similar briefing sessions for 30 to 100 participants from brokerage firms were held 21 times across the country, as well as two online briefing sessions. In North America, we visited one institutional investor. We also held one ESG small meeting and nine ESG interviews, where we explained that we are working to achieve 50% reduction of use-phase CO2 emissions by 2050 as part of our initiatives on material social issues, environmental and resource issues in particular, in an effort to avoid reputation risks.

Customer Risks

We deliver products such as automotive engines, multi-purpose engines, and industrial robots to customers. Some of our corporate customers request suppliers that emit large amounts of CO2 to set CO2 reduction targets and disclose environmental information. Those that cannot meet these requests risk losing business in the worst case. To avoid facing this risk, our staff in charge of the environment collect and disclose information appropriately according to each customer's requests, making sure every requirement is met.

Short-term, Medium-term, and Long-term Risks and Opportunities

We discuss short-term, medium-term, and long-term risks in the following time frames.

Short-term
Risks
Risks that may have an immediate impact on business performance (including risks that may materialize in a period of 0 to 3 years)
Medium-term
Risks
Risks that may have a significant impact on our business performance through the materialization of long-term climate-related impacts, and that may necessitate a major adjustment of our strategies (including risks that may materialize in a period of 3 to 6 years)
Long-term
Risks
Risks that may radically impact the feasibility of our long-term strategies and business models (including risks that may materialize in a period of 6 years or more)

We evaluate the materiality of climate-related risks based on whether they are likely to materialize in the short term, medium term, or long term, and the estimated scale of the resulting financial impact.

Short-term Risks (0–3 Years)

In the motorcycle market, many governments have tightened or are planning to tighten emission standards. Since our products are subject to these standards, costs required to ensure compliance will increase. If these costs cannot be absorbed, they will be passed on to retail prices, which will make our products less competitive and may reduce operating income.
In 2020, Europe has moved to more stringent Euro 5 emission standards. ASEAN, India, and China tend to introduce regulations based on European standards three to five years later. India, where 21 million new vehicles are sold in a year, is a critical market for Yamaha Motor, and increased compliance costs will pose a significant risk to our product competitiveness and have a major financial impact.

Our regulations and certification division collects information about emission standards in each country. This information is reflected in product plans for our motorcycle business as required. In developing fuel-efficient engines and electric motor products, we seek to increase product appeal by improving power performance and rideability at the same time, instead of simply conforming to regulations. In other words, we are striving to increase profit by enhancing added value, as exemplified by our BLUE CORE engines.
In terms of risk management, local sales divisions obtain the latest information on the tightening of regulations and report the findings to development divisions. Our global models are developed to conform to European standards as a measure to minimize risks in case ASEAN, India, and other countries suddenly decide to tighten their regulations.

As for marine engines, the U.S. EPA and CARB emission standards, which already cover the inboard and sterndrive engine categories, are slated to be further enhanced going forward. Our outboards boast a global share of more than 40% and maintain an overwhelming advantage in the market. However, if these standards are applied to outboards and sport boats as well, compliance costs will increase. If these costs cannot be absorbed, they will be passed on to retail prices, which will make our products less competitive and may reduce operating income.

Our regulations and certification division collects information about regulations concerning air pollution in each country. This information is reflected in product plans for our marine business as required. In developing fuel-efficient engines and lighter hulls, we seek to increase product appeal by improving power performance and comfort at the same time, instead of simply conforming to regulations. In other words, we are striving to increase profit by enhancing added value. In terms of risk management, local sales divisions obtain the latest information on the tightening of regulations and report the findings to development divisions. As a leading company in the marine industry, we are pursuing plans to achieve 4 STAR Voluntary Standards (2015–2020 exhaust emission standards) ahead of time to minimize associated risks.

Medium-term Risks (3–6 Years)

Our core motorcycle business expects to see continued significant market expansion going forward, including in India, the world's largest motorcycle market where approximately 22 million vehicles* are sold each year. This will be accompanied by an increase in the amount of goods distributed. For example, India stepped up its emission standards to Bharat Stage 6 in April 2020, so logistics operators will need to replace their fleet of transport vehicles. Moreover, if carbon taxes that are being considered around the world are applied to fuel charges, the fuel costs of logistics operators will increase. These developments will result in increased distribution costs for us as well. In 2019, 242 thousand tons of CO2 were emitted from distribution activities.* Based on Company's survey in 2018

According to a report by the Carbon Pricing Leadership Coalition (CPLC), carbon taxes will reach 80 dollars/t-CO2 by 2020 and 100 dollars/t-CO2 by 2030, assuming that all signatories to the Paris Agreement meet their reduction targets. Given that our CO2 emissions from distribution activities are the same as in 2019, the increase in distribution costs based on the above carbon taxes is estimated to be between 2.1 and 2.61 billion yen per year.

Our global distribution centers obtain data on fuel usage and fuel economy from logistics operators to monitor the CO2 emissions from the distribution of goods. We also provide guidance on loading and consolidating cargo to increase delivery efficiency, as well as conducting periodic reviews of delivery routes and training on environmentally friendly driving techniques, to reduce the risk of increased CO2 emissions. To improve the load factor, we also plan and develop packing technology including product design. Management costs comprise 3 million yen in system operation expenses and maintenance and inspection costs, and approximately 7.6 million yen in labor costs.

Long-term Risks (6+ Years)

As consumers become more environmentally aware, they may start avoiding gasoline-powered products, reducing our sales and profits. We pursue diverse business operations based on a core strength in small, lightweight engines, offering products ranging from motorcycles and outboards to golf cars and generators. As such, we will be severely impacted if the use of fossil fuels is banned.

To address this risk , we will develop mobility products that use next-generation power sources instead of fossil fuels (electric motorcycles, PAS, low-speed electric land cars, etc.) and propose sharing services in collaboration with local governments. We will also expand robotics and other solution businesses. In terms of risk management, we will push ahead with collaboration with partners to ensure our products are incorporated into the social infrastructure, keeping an eye on the CASE* trends in the automotive industry. To make sure we do not miss any opportunity in expanding market areas, we are studying combinations of our proprietary technologies, carrying out M&As as necessary, in an effort to reduce the risks that we will face if the use of fossil fuels is banned.
* CASE refers to "connected" cars, "autonomous" driving, car "sharing and services," and "electric" vehicles, which are the four major trends that the automotive industry must pursue in the next generation.

Each year, we manufacture over 5 million motorcycles around the world, with Indonesia (31%), India (17%), and Vietnam (17%) accounting for 65% of the production volume. In climate pledges drafted under the Paris Agreement, Indonesia set a CO2 reduction target of 29% (41% with cooperation from developed countries), India 33–35%, and Vietnam 8% (25% with cooperation from developed countries) by 2030. If the governments of these three countries, where our major production bases are located, make it mandatory for factories to report CO2 emissions and introduce fines for failure to meet reduction targets, there will be major impacts on our business operation, including financial impacts. In 2019, 527 thousand tons of CO2 were emitted from production activities.

According to a report by the Carbon Pricing Leadership Coalition (CPLC), carbon taxes will reach 80 dollars/t-CO2 by 2020 and 100 dollars/t-CO2 by 2030, assuming that all signatories to the Paris Agreement meet their reduction targets. Given that our CO2 emissions from production activities are the same as in 2019, the increase in costs based on the above carbon taxes is estimated to be between 4.553 and 5.692 billion yen per year. The Manufacturing and Production Engineering Center at our headquarters monitors CO2 emissions from the production activities at all manufacturing sites, and provides guidance to help them achieve reduction targets. Each production base constantly monitors trends related to environmental regulations in the country where it operates. Other environmental trends including regulations are being followed by the secretariat of the Environment Committee at our headquarters, and important relevant matters are submitted to the Environment Committee for deliberation. Management costs mainly consist of travel expenses for dispatching experts from the Manufacturing and Production Engineering Center at the headquarters, which amounted to 8 million yen in 2019.

Yamaha Motor's Adaptation Measures

Urgent Physical Risks

Our major manufacturing bases are concentrated in the ASEAN region, and factories located in the Philippines and Thailand, where typhoons pass over, face operational risks such as flooding of factory floors due to heavy rains.

To prepare for such risks, Companywide risks including natural disasters, violations of laws related to product quality, critical product accidents, and cybersecurity are incorporated into the activity policies of each headquarters division and overseas Group company, and those that we particularly need to focus on to prevent and address are established as significant risks at the Group level. Based on the Rules of Risk Management, we established the Sustainability Committee, chaired by the President and Chief Executive Officer, to monitor the overall risk status of the Group, as well as designating significant risks at the Group level to be tackled as priorities and checking on activities to address risks, in an effort to reduce Groupwide risks. In addition, to prepare against envisioned risks that could impact the continuity of our business, we have formulated the Rules of Business Continuity, which seek to minimize damage through appropriate response.

Chronic Physical Risks

Increased flood damage due to climate change spreads the pollution of water sources, deteriorating people's health conditions and adding to the number of the sick, which in turn impede social and economic development.

To address this risk, our staff in charge of the environment collect relevant information, evaluate water risks in each country based on water withdrawal and water stress using Aqueduct, a tool made available by the World Resources Institute (WRI), and implement measures according to the level of water risk to minimize water use. In addition, we developed a small water purification system called the Yamaha Clean Water Supply System to help improve people's health conditions and contribute to social and economic development through a new business, and started introducing it around the world in 2010. Adaptation measures in the area of water supply consist of addressing water pollution caused by climate change and improving people's health conditions and the social and economic environment. As of the end of March 2020, we have installed 41 units in 14 countries.

Global warming is raising concerns worldwide that it will have negative impacts on the agricultural field, such as reduction of farmland, fluctuations in yield, and movement of land suitable for cultivation due to temperature rise, droughts, floods, and other factors.

We will contribute to the realization of sustainable agriculture by providing a solution that uses our YMR-08 multi-rotor agricultural drones and industrial-use unmanned helicopters to conduct highly efficient and accurate pest control and top-dressing operations, and manage spraying data to increase the value and efficiency of spraying operations. Moreover, to enhance the value of using this service in areas such as crop growth analysis, field soil analysis, optimal fertilization planning, and load reduction of pesticide spraying work, we are collaborating with various partners. These include Kokusai Kogyo Co., Ltd., which provides Appare, a service that works to improve farming productivity using satellite image analysis; TOPCON Corporation, which offers Crop Spec, laser-based crop sensors indispensable in the operation of a variable top-dressing system; and WaterCell Inc., which offers agri-note, an agricultural support system that can unify the management of process data for a series of agricultural work.

YSAP
YSAP:Yamaha Motor Smart Agriculture Platform
A software service that uses smartphones and computers to manage data and operations of pesticide spraying and fertilization work performed by YMR-08 and industrial-use unmanned helicopters

Yamaha Motor's Mitigation Measures

Promotion of Low Carbon Products

The products we provide, including our core product line of motorcycles, are characterized by their light weight and compact forms. They have small environmental impacts in terms of resource use during the manufacturing phase, and during the use phase they serve as a convenient means of transportation with excellent maneuverability for freely traveling short distances. Motorcycles, a relatively compact and inexpensive type of mobility vehicles, meet the demand for transportation of goods and services, particularly in emerging nations that are undergoing rapid economic growth. They also expand the spheres in which people live their daily lives, giving them more options in terms of work and educational opportunities. Moreover, they do not require any major infrastructure development, so they will not cause significant damage to the global environment.

Under our BLUE CORE motorcycle engine design concept, which balances fuel economy and environmental performance at a high level, we release a new model with improved fuel efficiency to the global market each year, as we position the reduction of Scope 3 Category 11 "Emissions from use of products," which account for 83.5% of our CO2 emissions, as one of our most important initiatives.

Motorcycles are an environmentally friendly and sustainable mobility option with 1/26th the product life-cycle CO2 emissions (from resource mining to disposal) and 1/40th the resource usage of passenger cars.

Comparison of CO2 emission in product life cyclesFigures based on company's survey
Fig.
BLUE CORE

A motorcycle engine design concept that balances fuel economy and environmental performance at a high level

In 2019, approximately 84% of our motorcycles were shipped to the ASEAN region, making it an area with the largest use-phase CO2 emissions. In the ASEAN region, motorcycles are a primary means of transportation for commuting to work or school and in other daily situations. They also serve an important role as part of the social infrastructure that supports the movement of goods and services. We promote our low-carbon product models featuring BLUE CORE globally as a mobility option that contributes to economic growth and the resolution of environmental issues.

Percentage of models featuring BLUE CORE among the number of motorcycles sold globally
Fig.
Promotion of Electrically Power Assisted Bicycles

Prompted by an awareness of global environmental issues and the social issues of a declining birthrate and an aging population, which came to the fore in the 1980s, we embarked on the development of a new vehicle that did not belong to any existing category. Our development concept: "a personal commuter that is both people friendly and environmentally friendly, and places top priority on human sensibilities." This effort culminated in the 1993 launch of the PAS, the world's first electrically power assisted bicycle. Since then, we have developed various businesses around this product, including the sales of completed vehicles and supply of drive units in Japan, as well as the global supply of system kits for electrically power assisted bicycles starting in 2012, based on enhanced and expanded collaboration with European bicycle manufacturers. In February 2019, cumulative production of drive units for electrically power assisted bicycles reached 5 million units.

Ceremony commemorating the cumulative production of 5 million drive units for electrically power assisted bicycles
(Main Factory of Yamaha Motor Electronics Co., Ltd.)
Specific product-based mitigation measures aimed at 2025 milestones
Contribution to Low Carbon Society
Contribution to Recycling Society Contribution to Society in Harmony with Nature
Specific measures aimed at 2025 milestones Electrification
Alternative fuels
Improved fuel efficiency
Improved electric efficiency
Lighter weight
Durability
Recycling and rental
Sharing, etc.
Specific initiatives

Land Mobility

  • Motorcycles
  • Electrically power assisted bicycles
  • ROVs
  • SMBs
  • ATVs
Support for Indian market standards Aluminum cast wheel for NIKEN wins the Casting of the Year Award
  • Cleaning activities at MC events
  • Support for "LOVE the Earth" activities

Marine Products

  • Marine engines
  • Boats
  • Personal watercraft
  • Pools
Addition of small electric models Improvement of propulsion efficiency Expanding introduction of aluminum pontoons Active use of the Japan Marine Industry Association's recycling system  
Development of low-drag hull form Significant increase in maximum loading capacity Promotion of Sea-Style
  • Support for coral reef conservation activities
  • Performance of Baby Turtle Observation Tour and Sustainable Beach Project beach cleanup activities
  • Performance of Marine Cleanup Activities at Lake Hamana
  • Support for investigation of marine plastics

Robotics

  • Industrial robots
  • Industrial-use unmanned helicopters
Reduction of cycle time   Expansion of opportunities to provide labor-saving, high-efficiency multi-solutions
Provision of smart agriculture software services  

Others

  • Golf cars
  • Electric wheelchairs
  • Automotive engines
  • Multi-purpose engines
  • Generators
  • Snow blowers
Development of New Concept Cart SC-1 concept model vehicle Promotion of models with improved fuel economy Transportation system with minimal environmental impact Joint initiatives toward realization of MaaS Expansion of rental plans  
Entrusted with prototype development of an electric motor unit for EVs Improvement of battery unit efficiency Investigation of new materials Single-rider mobility proposals
Global Implementation of Theoretical Value Energy Activities in Production Operations

At Yamaha Motor, we are working to reduce CO2 emissions of the entire Group by cooperating with overseas Group companies, sharing energy-saving know-how accumulated within Japan. Specifically, we are implementing a "theoretical value energy" approach, in which we define the value and quasi-value of each facility and process at our production bases in Japan and abroad, identify the essential functions, and aim to minimize loss. To date, we have visited 30 locations in 13 countries, covering 98% of Groupwide CO2 emissions, in our effort to reduce energy loss.

Theoretical Value Energy
In this approach, we pursue energy minimization by defining the energy theoretically required in facilities and processes as "value energy," and thoroughly eliminating quasi-value and non-value areas through improvements in both facilities and operations. We are implementing this approach at suppliers as well as Group companies in Japan and overseas.

Graph
Expanding Use of Renewable Energy at Production Sites

We are installing power generation systems that use solar and wind power. Following the installation of a solar power generation system at the Main Factory in 2004, these systems have been successively installed elsewhere and the use of renewable energy is expanding. Installations continue at overseas locations including in the United States, Thailand, and Taiwan, and in 2019, solar power generation systems were introduced at production sites in India. The amount of power generated in 2019 totaled 17,032 MWh (equivalent to a reduction of roughly 14,231 t-CO2), and was used for various factory operations and office lighting and air conditioning.

Picture
IYM-CHE, India

Risk Management

Process of Identifying and Evaluating Climate-related Risks

We identify and evaluate climate change risks from two perspectives: business strategy and business continuity.

Identification of Risks

Each operating division and functional division categorize short-term, medium-term, and long-term climate-related risks into "risks related to transitioning to a low-carbon economy" and "risks related to physical changes caused by climate change." Then, they consider the financial impacts of these risks on business, as well as the financial impacts on business with climate change mitigation measures and adaptation measures as opportunities for management reform, and identify risks and opportunities in the medium-term business plan.

Companywide business continuity risks including climate-related risks, violations of laws related to product quality, critical product accidents, and cybersecurity are incorporated into the activity policies of each headquarters division and overseas Group company, and those that we particularly need to focus on to prevent and address are identified as significant risks at the Group level. In this manner, climate-related risks are incorporated into the Groupwide system for risk management.

Evaluation of Risks

The Environment Committee, chaired by the executive officer in charge of environment activities, evaluates specific initiatives undertaken as a business strategy on risks and opportunities identified by each operating division and functional division.

The Sustainability Committee, chaired by the President and Chief Executive Officer, evaluates specific initiatives on significant risks at the Group level, particularly Companywide business continuity risks, including climate-related risks, that the Company needs to focus on to prevent and address. In this manner, climate change-related risks are incorporated into the Groupwide system for risk management.

Process of Managing Climate-related Risks

The Environment Committee manages the annual progress toward the goals and targets of specific initiatives undertaken as a business strategy on risks and opportunities identified by each operating division and functional division. It reports results to the Sustainability Committee, which consists of the same members as the Management Committee, and the Board of Directors.

Specifically, each operating division and functional division considered short-term, medium-term, and long-term risks and opportunities, their business, strategic, and financial impacts, and the climate scenario of the 2°C target, based on the designated climate change materialities of a "low carbon society," "resource recycling society," and "society in harmony with nature." Then they formulated specific numerical targets for 2025 and 2050 (reduction of use-phase CO2 emissions by 19% per unit sales by 2025, 50% by 2050, from 2010 levels, and reduction of production-phase CO2 emissions by 19% per net sales by 2025, 50% by 2050, from 2010 levels). The Environment Committee manages progress and deliberates matters that have a significant impact on business, and submits reports or resolution matters to the Board of Directors at least twice a year.

Indicators and Targets

Setting 2025 milestones

Indicators and Targets

Action Themes Targets Specific Actions
2050 2025
Low Carbon SocietyLow Carbon Society Reduction of CO2 emissions from use of products by users 50% reduction
(on 2010 levels)
19% reduction
(on 2010 levels)
■Details by product
Reduction of CO2 emissions generated in operation of production 50% reduction
(on 2010 levels)
19% reduction
(on 2010 levels)
■ Increase deployment rate of existing items
  • - Automated shutdown (motors, air)
  • - Shift to inverters
  • - Reduction of heat radiation
■ New energy conservation expertise
  • - Steamless
  • - Exhaust heat recovery (furnaces, compressors, etc.)
  • - Shift to servomotors
■ Theoretical value energy
  • - Visualization of valuable and non-valuable energy
  • - Thorough elimination of non-valuable energy
■ Expand introduction of low carbon energy
  • - Installation of solar power generation systems, etc.
Recycling SocietyRecycling Society Reduction of waste generated in operation of production 50% reduction
(on 2010 levels)
14% reduction
(on 2010 levels)
■ Make definition of waste known and understand current situation
  • - Establish and make known global common definition of waste, build aggregation system
  • - Understand waste volume using global aggregation system
  • - Conduct site investigation to find and understand issues
■ Deploy reduction package
  • - Summarize reduction measures that were effective in the past, and deploy these globally
    (Sludge dewatering, making coolant fluid last longer, etc.)
■ Develop waste reduction technologies and measures
  • - Develop new reduction technologies and measures through exchange and collaboration with other companies
    (Foundry sand, distribution waste, etc.)
■ Operate waste reduction organizations
  • - Make effective use of environmental governance organizations to promote reduction of waste globally
  • - Foster waste reduction promoters
Reduction of water consumption in operation of production Aiming to reduce water consumption through initiatives according to water risk* in each area
*Water risk is a water supply-and-demand indicator independently defined by Yamaha Motor, with reference to Aqueduct and other tools made available by the World Resources Institute.
■ Continue to measure amount of water consumption at Group companies
  • - Use global aggregation system to continue measuring amount of water consumption
■ Monitor sites with high water risk
  • - Monitor reduction of water consumption at individual sites where water risk becomes higher
Management Strengthening of compliance with environmental laws and regulations and management of chemical materials in products Zero harmful substances in products Strengthening of compliance with environmental laws and regulations and management of chemical materials in products ■ Reduce environmentally hazardous substances in products
■ Enhance system and mechanisms, activities for raising awareness
■ Risk management of environmentally hazardous substances control
■ Carry out thorough compliance
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