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System/Activities TCFD Alignment/Plan

TCFD Report

KT&G preemptively analyzes the key factors of climate change risks and opportunities and their impact on
our business, and advance our strategies to mitigate risks and realize opportunities.

Analysis on Climate Change Risks / Opportunities and Strategies

We identify transition and physical risks that may occur from climate change across our business. Also, we evaluate their materiality based on probability of occurrence and financial impact on business. We have prioritized risks that we should manage and measures to address them by discussing comprehensively within the company and receiving consultation from external experts.

Risk Identification and AssessmentKT&G Risk Mitigation Measures
Transition Risk T1 Policy
& Legal
As a designated entity under K-ETS, we need to purchase extra carbon credits if the emission exceeds the allowance. Due to intensifying global carbon regulation and extra spending on renewable energy, we could face additional financial burden. We estimate Business-as-Usual emissions to predict shortfalls compared to allowance, monitor carbon credit prices, and proactively implement emission reduction projects to minimize financial burden.
T2 Market Increase in tobacco leaf production costs is expected due to rising energy price such as LNG, electricity, and gasoline. Increase in raw material costs will raise total production costs. We continuously monitor energy use from our overall business and invest and implement internal projects to improve energy efficiency.
T3 Reputation If water shortage continues due to climate change, it may pose risks such as intensifying competition to secure water as tobacco industry is water-intensive. In order to reduce water-related risk, we evaluated the risk level of domestic and overseas facilities and established the risk management system.
Physical Risk P1 Acute We expect increase in operation costs due to unusual weather condition such as typhoons and heavy rains that could affect tobacco leaf yield or supply chain causing fluctuations in quality, difficulties in managing distribution and inventory. We identify weather patterns where domestic and international tobacco leaf and raw material suppliers are located in. Then, we prepare countermeasures to prevent supply chain damage in advance.
Opportunity Identification and AssessmentKT&G Opportunity Realization Measures
Opportunities 01 Products
& Services
By enhancing product sustainability expanding sales of low-carbon products and reducing waste, we will proactively respond to consumers’ needs of eco-friendly products and enhance resource circularity throughout the entire value chain. We aim to minimize the environmental load throughout the life-cycle of the product by developing products that meet consumer needs’ utilizing eco-friendly materials and recycling returned NGP devices and promoting our sites to be ZWTL certified.
02 Resilience By participating in global initiatives related to climate change and renewable energy, we can contribute to developing mid- to long-term risk mitigation solution and strengthening its capabilities. By responding to global initiatives and external rating agencies such as CDP Climate Change and CDP Water Security, we have strengthened internal capacity in environmental risk management such as GHG emissions reduction and water management.
03 Resource
Efficiency
By enhancing production facility performance and improving energy efficiency, we could reduce operation and energy costs and contribute to transition to a low-carbon industry. We expect decrease in operating cost by reducing GHG emissions improving energy efficiency, replacing fleet to electric vehicles. Also, we aim to reduce GHG emissions throughout the value chain by distributing high efficiency devices to tobacco leaf farms.
Transition Risk
T1 Policy & Legal
Risk
Identification
and
Assessment
KT&G Risk
Mitigation
Measures
As a designated entity under K-ETS, we need to purchase extra carbon credits if the emission exceeds the allowance. Due to intensifying global carbon regulation and extra spending on renewable energy, we could face additional financial burden.
We estimate Business-as-Usual emissions to predict shortfalls compared to allowance, monitor carbon credit prices, and proactively implement emission reduction projects to minimize financial burden.
T2 Market
Risk
Identification
and
Assessment
KT&G Risk
Mitigation
Measures
Increase in tobacco leaf production costs is expected due to rising energy price such as LNG, electricity, and gasoline. Increase in raw material costs will raise total production costs.
We continuously monitor energy use from our overall business and invest and implement internal projects to improve energy efficiency.
T3 Reputation
Risk
Identification
and
Assessment
KT&G Risk
Mitigation
Measures
If water shortage continues due to climate change, it may pose risks such as intensifying competition to secure water as tobacco industry is water-intensive.
In order to reduce water-related risk, we evaluated the risk level of domestic and overseas facilities and established the risk management system.
Physical Risk
P1 Acute
Risk
Identification
and
Assessment
KT&G Risk
Mitigation
Measures
We expect increase in operation costs due to unusual weather condition such as typhoons and heavy rains that could affect tobacco leaf yield or supply chain causing fluctuations in quality, difficulties in managing distribution and inventory.
We identify weather patterns where domestic and international tobacco leaf and raw material suppliers are located in. Then, we prepare countermeasures to prevent supply chain damage in advance.
Opportunities
O1 Products & Services
Opportunity
Identification
and
Assessment
KT&G
Opportunity
Realization
Measures
By enhancing product sustainability expanding sales of low-carbon products and reducing waste., we will proactively respond to consumers’ needs of eco-friendly products and enhance resource circularity throughout the entire value chain.
We aim to minimize the environmental load throughout the life-cycle of the product by developing products that meet consumer needs’ utilizing eco-friendly materials and recycling returned NGP devices and promoting our sites to be ZWTL certified.
O2 Resilience
Opportunity
Identification
and
Assessment
KT&G
Opportunity
Realization
Measures
By participating in global initiatives related to climate change and renewable energy, we can contribute to developing mid- to long-term risk mitigation solution and strengthening its capabilities.
By responding to global initiatives and external rating agencies such as CDP Climate Change and CDP Water Security, we have strengthened internal capacity in environmental risk management such as GHG emissions reduction and water management.
O3 Resource Efficiency
Opportunity
Identification
and
Assessment
KT&G
Opportunity
Realization
Measures
By enhancing production facility performance and improving energy efficiency, we could reduce operation and energy costs and contribute to transition to a low-carbon industry.
We expect decrease in operating cost by reducing GHG emissions improving energy efficiency, replacing fleet to electric vehicles. Also, we aim to reduce GHG emissions throughout the value chain by distributing high efficiency devices to tobacco leaf farms.
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