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Addressing Climate Change

Basic Concept

The JAL Group recognizes that an action to climate change is a particularly important issue for the sustainability of society. In June 2020, we announced our commitment to achieve net zero CO2 emissions by 2050 in order to steadily promote various initiatives including CO2 emissions reduction as an air transport operator’s responsibility. Also, we announced our support for the recommendations from the Task Force on Climate-related Financial Disclosures (TCFD) in February 2021, and for the Science Based Target (SBT) initiative in March 2022.
In accordance with the Medium-Term Management Plan - Rolling Plan announced in May 2023, the JAL Group will work to achieve JAL Vision 2030 and sustainably improve corporate value by positioning ESG strategy as the topmost strategy in order to realize value creation and growth and by achieving medium- to long-term growth through the manage of risks and opportunities.
The JAL Group has established an the JAL Group Environmental Policy based on this concept and a promotion system under this policy. As a corporate citizen, we are working to preserve the environment and remove impediments to our progress.

Governance

The JAL Group's Board of Directors demonstrates a strong supervisory function through the periodic reporting (four times in FY2022) on the execution of initiatives concerning climate change and biodiversity.
In the execution, the Sustainability Promotion Council, chaired by the President, formulates basic policies, sets important targets and manages progress, and deliberates and decides on policies to deal with issues.
The Sustainability Promotion Committee, chaired by the Senior Vice President of the General Affairs Division, deliberates on individual issues identified through the environmental management system (EMS) and reports to the Sustainability Promotion Council.
The Medium-Term Management Plan incorporates responses to climate change into its management strategy, and defines the eight material issues for sustainability in general to address social issues through business. With a strong commitment to achieve sustainable business operations and corporate value improvement through steady efforts to address these issues, we reflect external ESG ratings and CO2 reduction targets in executive remuneration as indicators.

Issues presented and reported at the Board of Directors and the Sustainability Promotion Council in FY 2022

  • Progress in efforts to address climate change (Formulation of targets and annual results)
  • Information disclosure in line with TCFD recommendations
  • GX Strategy to achieve Net Zero CO2 emisions by 2050

Strategy

Scenario Analysis

The international community is rapidly moving toward a 1.5℃ scenario as the benchmark for climate change action, with tighter environmental laws and regulations in Europe, the United States' return to the Paris Agreement, Japan's Carbon Neutral Declaration and a major review of Nationally Determined Contributions (NDC), and the de facto 1.5℃ target agreement at COP26.
In 2018, the JAL Group participated in the “Project to Support Analysis of Scenarios of Climate Risks and Opportunities in line with TCFD Recommendations” organized by the Ministry of the Environment of Japan and predicted the society in 2030 based on two scenarios (RCP8.5*1, RCP2.6*2) of the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC), that is, keeping global warming to below 4℃ and below 2℃ by the end of the century.

*1 RCP8.5 Scenario: High-level reference scenario in the IPCC Fifth Report (equivalent to the maximum greenhouse gas emissions in 2100)
*2 RCP2.6 Scenario: Low-Level Stabilization Scenario in the IPCC Fifth Report (Lowest emissions scenario developed with the goal of keeping future temperature increases below 2℃)

Conditions for creating scenarios to achieve Net Zero CO2 Emissions by the JAL Group

Based on the 1.5℃ scenario, the JAL Group announced that it set a target of Net Zero CO2 Emissions by 2050 at its shareholders' meeting in June 2020. Below roadmap has been created considering risks and opportunities based on scenarios such as the IEA SDS *3 scenario.
With regard to the reduction of CO2 emitted by JAL Group aircrafts, we are studying CO2 emissions reduction scenarios targeting 2050 and discussing future issues and measures to be taken with reference to the latest study materials of ICAO and IATA based on the 1.5℃ pathway and ATAG’s*4 WAYPOINT 2050*5.
In preparing scenarios, we set the growth of RTK (Revenue Ton-Kilometers) based on total international and domestic passenger demand respectively, calculated the total volume of CO2 emissions up to 2050, and reflected the impact in each initiative.

*3 IEA SDS Scenario: Sustainable Development Scenario, a pathway to full achievement of the Sustainable Development Goals by the IEA (International Energy Agency)
*4  ATAG(Air Transport Action Group) - Global Alliance to Promote Sustainability in the Aviation Industry
*5  — See: Waypoint 2050Open link in a new window

Toward achieving our Net Zero CO2 Emissions by 2050, a new department dedicated to GX strategy was established in April 2023. JAL will continue to promote GX strategy through a wide variety of methods, including the use of internal carbon pricing (ICP) and negative emission technologies, in order to promote investment toward decarbonization, and the continuation of active efforts to use SAF *6, which is recognized as a particular focus.

In March 2022, we issued the world's first transition bond in the aviation industry to steadily upgrade our fleet to the most advanced equipment with high fuel efficiency (such as the A350 and 787), and it was selected as the first model example in Japan’s Aviation Industry for 2021 Climate Transition Finance Model Projects by Ministry of Economy, Trade and Industry of Japan. In March 2023, JAL became Japan's first in Airline to issue Transition-Linked Loans with Specific Use of Proceeds, and the loan was selected as a target of the Ministry of Economy, Trade and Industry's FY 2022 Global Warming Countermeasures Promotion Program Subsidy. In addition, JAL issued its second transition bond in June 2023, and is actively and continuously utilizing ESG finance. We are engaging in dialogue with investors to gain an understanding of our company's initiatives.

In October 2022, the International Civil Aviation Organization (ICAO) reviewed its long-term CO2 reduction targets for 2050, and the CORSIA *7 baseline was revised. In line with this, it is expected that CO2 emission reductions by airlines will be promoted, and countries will strengthen CO2 emission regulations and be active in CO2 emission trading. JAL recognizes that it is necessary to accelerate its response to climate change.

*6 SAF (Sustainable Aviation Fuel): CO2 Emissions can be reduced by an average of 80% compared to conventional jet fuel in the life cycle from production and procurement to manufacturing, transportation and combustion of feedstock.
*7 CORSIA: Carbon Offsetting and Reduction Scheme for International Aviation: A system that requires international flights to purchase emission credits for exceeding the 2019 CO2 emission standards (baseline)

Risks and Opportunities

Climate change will have a negative impact on the air transport business, which is based on the premise of operating in a "safe and secure society," and as a result, it may pose an enormous risk to the business continuity.
In addition, the response to climate change, including the reduction of CO2 emissions by airlines, may have various financial impacts, such as upgrading to fuel-efficient aircraft and responding to carbon pricing.
The JAL Group organizes and examines these factors that affect its business in accordance with the TCFD classification of risks and opportunities related to climate change and lists them in the table below. The categories of "timing" and "impact of occurrence" are as specified below.
The following was reviewed at the Board of Directors meeting on August 1, 2023.

Risk Management

The JAL Group defines risk as any event or action that may impede the achievement of the organization's mission, objectives, or goals, and conducts semiannual risk surveys and assessments. Those assessed as of particular importance are positioned as priority risks, and the status of risk management is reviewed at the Group Risk Management Council chaired by the President, where countermeasures are discussed and decided.
With regards to environmental issues such as climate change and biodiversity, which are priority issues in our management strategy, we implement risk management through the PDCA cycle based on the Environmental Management System (EMS), while considering relevant laws, regulations, and policy trends in the international community.

Risk Management System

Risks related to climate change, both transition risks and physical risks, are managed in the risk management system of the entire JAL Group.

Indicators and Targets

In order to pass on our precious Earth to the next generation, the JAL Group sets targets for environmental data such as CO2 and emissions, waste and water consumption, and discloses the results.

Due to the nature of the air transport business, direct emissions from aircraft account for about 99% of CO2 emissions. Based on this fact, we will first address the reduction of CO2 emissions from aircraft as our top priority, but we are also earnestly working to reduce CO2 emissions from indirect emissions from ground facilities with similarly high targets.
Achieving our goals is by no means easy, but we will continue to lead the industry in cutting-edge initiatives in line with the Japanese government's Clean Energy Strategy, while strengthening cooperation and collaboration with various stakeholders in Japan and abroad, in line with the international framework for reducing CO2 emissions.

Targets and Initiatives for CO2 Reduction by 2030

The JAL Group has set specific targets for 2030 (a 10% reduction in total emissions from 2019 levels) in May 2021 as the first Japanese airline and has taken the lead in promoting decarbonization of the global aviation industry through joint procurement of SAF in alliances and the use of ESG finance when renewing aircraft. Going forward, JAL will continue to accelerate our existing initiatives, such as steady renewal of fuel-efficient aircraft based on a stable financial base, steady implementation of JAL Green Operations, and strategic procurement based on specific SAF loading targets, and by implementing the utilization of emissions trading and consideration of the use of negative emission technologies as additional responses to the revised CORSIA baseline. We will boldly take on the challenge of achieving our targets.

Regarding SAF, while overseas manufacturing and supply chain construction activities are accelerating, it was clearly stated that SAF manufacturing and distribution will be promoted in Japan in “the Basic Policy for Economic and Fiscal Management and Reform 2023”, “Grand Design and the Implementation Plan for New Capitalism”, “Clean Energy Strategy”, and “Basic Policy for Realizing GX”. In order to realize its ambitious goal of replacing 10% of all installed fuel with SAF by 2030, the JAL Group will actively work toward commercializing SAF through public-private partnerships and cooperation with domestic and international stakeholders.

Our target for Scope 1 and 2 emission reduction are 100% by the year 2050.

Actions to be taken by FY2030 responding to Changes in the Business Environment

At the 41st ICAO General Assembly held at ICAO Headquarters (Montreal, Canada) from September 27 to October 7, 2022, the ICAO announced the long-term goals for decarbonization in the international aviation sector, and adopted to achieve Net Zero CO2 emissions by 2050, as well as a framework (the calculation standards for reductions to be imposed on each airline) for reducing CO2 emissions.
This is a major change in the framework, which revises the baseline for calculating the excess CO2 emissions of the international aviation sector to 85% of the 2019 level for the period 2024-2035. The JAL Group will respond to the changes in the business environment surrounding the CORSIA baseline review by utilizing emissions trading and other measures.

Concrete initiatives and information disclosure (aviation)

Upgrading to fuel-efficient aircraft

In September 2019, the Airbus A350 entered service on domestic routes, and in October 2019, the Boeing 787, which had been in service on international routes since 2012, entered service on domestic. These aircrafts are fuel-efficient and produce less noise, and can reduce the amount of CO2 emissions by 15% to 25% compared with conventional aircrafts.
Utilizing funds raised in public equity offering in 2020, the JAL Group will steadily continue to upgrade to fuel-efficient aircrafts in fiscal year 2021 and beyond.

Reducing CO2 Emissions in Daily Operations

Based on the fundamental premise of aviation safety's adherence to the principles, a variety of measures to reduce CO2 emissions are devised, including eco-flight initiatives by devising the timing and choice of handling during flight operations, reducing weight of aircrafts, and improving fuel efficiency through regular engine internal cleaning.
In addition, by promoting JAL Green Operations, a cross-organizational activity, which monitor the status of each initiative and share the progress within the company, thereby promoting the PDCA cycle to reduce CO2 emissions.

Supporting the Development and the Use of SAF

Aiming to be a leading airline in the use of SAF, the Group is working on a variety of projects, including the use in capital contribution of Fulcrum, a US-based SAF manufacturer, use of SAF produced in Japan for the first time in scheduled flights, and collaboration with partner companies to build supply chains for Japan domestic SAF.

Engaging in Emissions Trading

In addition to responding to the ICAO CORSIA, the Group also offers JAL Carbon Offset, in cooperation with CHOOOSE AS, as a unique initiative that allows passengers to offset their own CO2 emissions on their flights.

The JAL Group CO2 emissions by region

Topics

Disclosure regarding Climate Change of the JAL Group was selected as a good disclosure example in the TCFD Annual Report (see p. 49)

Furthermore, in the TCFD Consortium's "Guidance on Climate-related Financial Disclosures 3.0 (TCFD Guidance 3.0)" case examples, our disclosure was introduced as a good example, covering past emissions, targets and measures, enabling understanding the positioning of emissions reduction in the face of increasing demand, and setting an interim target for 2030 in conjunction with 2050 target. (page 30)

Concrete initiatives and information disclosure (ground facilities)

In the ground facilities field, initiatives with the goal of reducing unit energy consumption by 1% or more on average have been promoted. Under the "operator classification evaluation system" of Act on the Rational Use of Energy (Energy Conservation Act) implemented by Ministry of Economy, Trade and Industry, the Group has been certified by S Class good business operator classification for 7 consecutive years since 2015. In addition to reducing the volume of CO2 emissions in aviation and ground facilities, the Group is working to reduce the volume of CO2 emissions in the entire supply chain, including the volume of leftovers in inflight meals and lounges and food waste during cooking, as well as the volume of foodstuffs produced. We are also working to address to climate change in a variety of ways, including by cooperating with "the CONTRAIL Project", an atmospheric observation project.

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