JT Group Sustainability:Living with the planet | Integrated report 2023

Interest in environmental issues has been growing every year worldwide, and climate change is a leading concern. Corporations influence the environment through their operations, procuring resources needed to conduct business, emitting Greenhouse Gases (GHG) and producing waste in the process. At the same time, environmental factors influence our operations as well. As a worldwide business concern, the JT Group accepts the important responsibility of working to reduce the environmental footprint of its operations across the entire value chain to help make society more sustainable. Through sustainable operations, we conserve natural resources, reduce waste and make our business more cost-efficient. Responding to customer demand for environment-friendly, sustainable products, we are working to build harmony between our businesses and our environment.

Our environmental initiatives are based on the JT Group Environment Policy.

Targets and progress

In 2024, we set several targets related to “Living with the planet,” one of the materiality topics in the JT Group Sustainability Targets. Following up on efforts to achieve the objectives of the JT Group Environment Plan 2030, they have been updated to more ambitious targets, with some new targets added as well.

Read more about targets and progress on JT.com.

Targets	Representative targets
Biodiversity impact assessment	Each JT Group business will perform an assessment to evaluate its impact and dependence on ecosystems, including biodiversity aspects. We will complete impact assessments for our tobacco business in 2024, and for our pharmaceutical and processed food businesses by 2025.
Emissions reduction	All JT Group operations will be carbon neutral by 2030, and the entire value chain will achieve Net-Zero by 2050. Reduce absolute Scope 1 and 2 GHG emissions by 47% relative to 2019 levels by 2030, in line with the 1.5°C global warming scenario. Reduce absolute Scope 3 GHG emissions associated with purchased raw materials and services by 28% relative to 2019 levels by 2030.
Renewable energy	Convert all sources of energy used throughout the JT Group to renewable in order to achieve Net-Zero GHG emissions by 2050. Increase ratio of renewables in total energy consumed by the entire JT Group to 50% by 2030 and 100% by 2050.
Protecting water	Reduce water used in tobacco business operations by 33% relative to 2019 levels by 2030.
Enhancing biodiversity - No deforestation, no conversion	Replace all wood fuel from natural forests that directly contracted tobacco leaf growers use in the tobacco curing process with renewable fuel sources by 2030. Achieve Net-Zero deforestation of managed natural forests throughout the JT Group’s entire tobacco business supply chain by 2030.
Waste reduction	Achieve zero factory waste to landfills in our tobacco business by 2030.
Designing for circularity - Packaging, product and device	Reduce the volume of packaging (including plastic) used in JT Group operations, and bring reusable and recyclable packaging to 88% by 2025 and 100% by 2030.
Sustainable agriculture	Our tobacco business will eliminate the use of Criterion 1 Highly Hazardous Pesticides (HHPs) from its tobacco leaf supply chain in 2024 and all HHPs by 2040. 100% of our directly contracted growers will adopt the Good Agricultural Practices (GAP) Protocol of our tobacco business by 2030.

Road map to Net-Zero

The JT Group is working to make its operations carbon neutral by 2030 and achieve Net-Zero GHG emissions across the entire value chain by 2050, and its 2030 reduction targets have been validated by SBTi. In June 2024, we submitted a commitment letter declaring to make science-based GHG emissions reduction targets within two years toward Net-Zero GHG emissions across the value chain.

How the JT Group plans to achieve Net-Zero

Note:: These are the plans as of May 31 2024, and they are subject to revision in accordance with future business strategies

Climate change

Climate change is one of the most serious environmental challenges our society and businesses have ever faced. Manifesting as the greenhouse effect, extreme weather and the like, climate change affects not just the supply chain for our products, made mainly through agricultural production, but our operations worldwide as well. Addressing this challenge is therefore a serious commitment for the Group. Working to reduce GHG emissions over the long term, we are contributing to global measures against climate change. In February 2022, we announced our ideal of entirely carbon-neutral operations by 2030. This is an ambitious, science-based objective. In 2022, SBTi validated targets set by the Group in pursuit of limiting the increase in global average temperature to less than 1.5°C above pre-industrial levels. In June 2024, we submitted a commitment letter declaring to make science-based GHG emissions reduction targets within two years toward Net-Zero GHG emissions across the value chain by 2050.

The JT Group has been disclosing information in accordance with the Task Force on Climate-related Financial Disclosures framework.

Indicator	Description
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 the 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. See Corporate governance for the ESG-related index for executive remuneration. Our corporate governance position and structure can be found on the JT website
Strategy	Through climate scenario analysis performed in 2019, we identified two main risks: potential cost increases due to governments raising carbon taxes to further reduce GHG emissions and the impact on tobacco leaf 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 and Risk factors.
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 analyses. We will compare business-wide risks from local assessments and identify the most critical ones. See Country-level climate scenario analysis.
Metrics and targets	Our JT Group Environment Plan 2030 includes a commitment 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 about the JT Group Environment Plan 2030, Environmental data/External verification and Data calculation/consolidation methods on JT.com.

Scenario analysis

To identify risks and opportunities for our business related to climate change, the Group conducted scenario analyses using multiple scenarios (1.5°C, 4°C, etc.). In conducting these analyses, we utilized scenarios based on typical concentration pathways outlined by the Intergovernmental Panel on Climate Change (IPCC), such as Representative Concentration Pathways (RCP2.6, RCP8.5). As a result of the analyses, we identified two major climate-related risks: carbon pricing (increased carbon taxes) and changes in growing environments due to rising average temperatures.

	Risks and opportunities	Applied scenarios and financial impacts (billion yen)		Time frame			Impacts	Countermeasures
	Risks and opportunities	1.5℃	4℃	Short	Medium	Long	Impacts	Countermeasures
Transition risks	Measures and policies to address climate change effect	-8.5	-2.8	●	●	●	Land-use restrictions limiting material production	Closely examine policy trends Deepen low-carbon production methods
	Carbon pricing	-108.9	-2.7	●	●	●	Higher procurement costs for raw materials and others Higher in-house operational costs	Closely monitor carbon-tax trends Promote advanced decarbonization Collaborate with suppliers
	Demand/supply shift for materials and energy	-0.9	3.3	●	●	●	Increasing/decreasing costs for oil, electricity and materials, including batteries	Procure with future costs in mind
Physical risks	Changes in farming environments due to rising average temperatures	-3.5	-34.8	●	●	●	Higher costs for raw materials, like tobacco leaf and rice, due to changes in farming environments	Continuous reviews to ensure procurement from best locations Apply smart farming methods Reinforce relationships with key farmers
	More frequent, larger-scale abnormal climatic events	-7.1	-18.8	●	●	●	Impediment to plant operations Raw material shortages and higher material costs	Develop or choose weather resistant varieties Diversify supply and production locations
	Tight water supply	-0.1	-0.1		●	●	Suspension of plant operations due to drought Increased processing costs with reduced produce quality	Increase efficiency of water use at production sites
Opportunities	Changes in customer lifestyles	0.1	0.7		●	●	Higher demand for ethical products Increased demand for processed and frozen foods due to a growing need for easy meal preparation, an effect of rising temperatures	Monitor consumer trends Develop products catering to customer needs
Opportunities	Effects of rising temperatures on supplier locations and methods	0.2	1.1		●	●	Harsher price competitiveness for higher-yielding wheat varieties and the like	Promote smart farming and better varieties Partnerships with startup firms

Read more about climate scenario analysis on JT.com.

Biodiversity

Believing that the sustainability of people’s lives and corporate operations is possible only when nature and society are sustainable, the JT Group has made biodiversity preservation a high priority. By understanding how our businesses affect and depend on ecosystems, we are working harder to preserve biodiversity.

Risk assessment

In 2022, we undertook a qualitative assessment of the effects of our tobacco business and its dependence on ecosystems, based on TNFD v0.3 and the International Union for Conservation of Nature’s guidelines. We assessed our impact on natural resources at each stage of business, namely material procurement, production and disposal, as well as the scope and gravity of the influence, to identify where our impact on ecosystems is greatest. We did the same assessment and identification concerning dependencies.

Business effects and dependence on biodiversity

In tobacco leaf production, land use and soil pollution in Brazil were identified as the strongest effects of our business on biodiversity, and that holds true in other tobacco producing nations. On the dependency side, we found that our tobacco business greatly depends on a range of ecosystem services, such as protection from flooding and storm damage and land stabilization and erosion prevention in Brazil, and we found similar tendencies in other tobacco-producing nations.

Early-stage analysis of risks and opportunities

We identified the effects of landslides and floods, consequences of progressive soil deterioration following forest development, and overuse of agricultural chemicals as major risks to production volume and quality of tobacco leaf. We believe we can reduce such risks to some degree and discover more opportunities to procure tobacco leaf in reliable, sustainable ways by following through on our initiatives to maintain and enhance ecosystem services like tree-planting and agrichemical restrictions.

Reducing impact and dependence on biodiversity

We are working to reduce both the impact and dependence on biodiversity of our Tobacco business, with reference to the AR3T framework, based on the Science-Based Targets for Nature guidance, from the standpoints of avoidance, reduction, regeneration, restoration and transformation. We avoid the use of toxic agrichemicals and replace them with safer, more environment-conscious products. We reduce waste by managing the safety and possible impacts of our products and packaging on society and the environment throughout their life cycles, and by operating systems designed for effective recycling of products as resources and managing industrial waste. The Group helps preserve forests by assisting with natural regeneration. In Zambia, we participate in the Shishamba Forest Livelihoods Project for sustainable management of the Miombo woodlands. In Brazil, we work to restore over 300 hectares of permanently protected areas in partnership with research institutes, environmental-education organizations and the nation’s National Bank for Economic and Social Development. As part of this transformation, we have been accelerating our efforts to organize and standardize data pertinent to biodiversity preservation in partnership with the international non-profit LIFE Institute since 2017.

Protecting water

Water is an important natural resource for our business activities, and we have already achieved a 15% reduction in water withdrawal associated with our tobacco business compared to 2015 levels, a target of the JT Group Environment Plan 2030, ahead of schedule. Under the JT Group Sustainability Targets, we have set our own independent standards that reflect or exceed those of laws and regulations, including more ambitious targets for water withdrawal reduction and targets related to preventing water pollution so as to minimize impacts on ecosystems, and we monitor our performance. We require all of our tobacco leaf suppliers to produce high-quality tobacco leaf and implement our GAP Protocol with a view to protecting ecosystems. This not only increases the economic sustainability of the tobacco leaf growers, but also prevents the risk of water pollution with nitrate nitrogen, a highly water soluble compound that is incorporated in many chemical fertilizers and agrichemicals that are widely used on agricultural land.

Enhancing biodiversity - No deforestation, no conversion

We have a target to totally replace the naturally obtained wood that our directly contracted tobacco leaf suppliers use to dry tobacco leaves with renewable fuel resources by 2030. We use the Agroforestry app to log annual tree-planting progress in tobacco farmlands in Tanzania, Zambia and Brazil. The JT Group also works to achieve Net-Zero destruction of the forests it manages across its entire supply chain for the tobacco business by 2030.

Please refer to JT website for details of the initiative.

Waste reduction

We have already achieved our JT Group Environment Plan 2030 target of a 20% reduction in the volume of waste associated with our tobacco business compared to 2015 levels ahead of schedule, and we have now set a more ambitious target in the JT Group Sustainability Targets. In addition to reducing waste generated in our business activities and changing our waste disposal methods, we have also incorporated initiatives related to products used by consumers with the goal of reducing environmental impacts throughout the value chain. Targeting zero factory waste to landfills by 2030, we are reducing the use of packaging materials that contain plastic, and aiming to have 100% of our packaging made from recycled or recyclable materials by 2030.

Collaboration with suppliers

Collaboration with suppliers is important for understanding and improving our impacts on ecosystems, including realizing Net-Zero GHG emissions throughout the value chain.

To reduce Scope 3 GHG emissions, we are using a supply chain program provided by CDP, an international environmental NGO, to help us ascertain environmental information related to diverse suppliers associated with our business, including suppliers of raw materials, such as tobacco leaf, and logistics companies.

By doing so, we have strengthened our engagement with suppliers, enabling us to identify environmental risks and business opportunities in the value chain, and we are now examining and implementing measures for more efficient energy use and reduction of GHG emissions.

We will be constantly mindful of what the JT Group can achieve as we continue to collaborate with suppliers in committed efforts to preserve healthy relationships between nature, people, and companies.

Integrated report

Living with the planet